A time capsule of the greatest financial mania in the history of mankind, told in real-time by regular folks and patriots. May future generations better understand the madness of crowds, and how power and money corrupt.

Dear John: I remember well Alan Greenspan's statements touting adjustable-rate mortgages in 2004. I have been a sub-prime mortgage banker for 13 years.

Whenever someone had a mortgage problem they'd simply re-finance their way out of trouble. In sub-prime, a borrower that had a 7 percent adjustable-rate mortgage may now adjust to 9 percent on a $250,000 loan. That's a $347 a month change - significant but not necessarily life-threatening.

The same loan on an Alt-A option arm might go like this: Let's say there's a starting payment of $804 a month. If the negative amortization cap kicks in, the rate is automatically forced up, and the new payment may be based on 7 percent or even 8 percent interest.

Let's say it's 7 percent on a $250,000 loan. The new payment is suddenly $1,663 a month, or an additional $859 a month. Again, sub-prime has lost some investor confidence and rightfully so. But the Alt-A product noted above has a much greater impact on the consumer foreclosure rate. P.R.

Dear P.R.: OK, so you are saying that the worst is yet to come.

For those who aren't familiar with the term Alt-A, these are mortgages given to people who aren't prime customers but aren't sub-prime either. These mortgages are rated below A grade on lenders' books.

There is also less stringent documentation for Alt-A loans than with regular mortgages.

So we are all looking at our watches wondering when the housing bust will end when we should really be looking at a calendar. Unfortunately, housing-market cycles are long and - usually - painful. There's no reason to believe it will be any different this time. Thanks for the education.

The numbers looked compelling. Buy this investment-grade collateralized debt obligation and you will get a return of up to 10 percent, Credit Suisse Group said. That was almost 25 percent more than the average yield on a similarly rated corporate bond.

Investors snapped up the $340.7 million collateralized debt obligation, or CDO, a collection of securities backed by bonds, mortgages and other loans, within days of the Dec. 12, 2000, offering.

By the end of 2006, losses totaled about $125 million.

The failed Credit Suisse CDO may be an omen of far worse to come in the booming market for these investments.

"It's important to understand that unlike in the corporate bond market, in the securitization market, the rating agencies run the show," he said. "This is not a passive process of rating corporate debt. This is a financial engineering business."

As home buyers and investors grapple with the subprime mortgage crisis, many have not yet realized the extent to which that turbulence is spilling into CDOs. Foreclosure filings in the United States surged to 147,708 in April, up 62 percent from April 2006, as subprime borrowers stopped making mortgage payments.

As foreclosures increase, the subprime-backed securities in CDOs begin to crumble. Subprime mortgage securities make up about $100 billion of the $375 billion of CDOs sold in the United States in 2006. Investors have little idea how toxic some of these CDOs are, Mason of Drexel said.

"We compose CDOs with a bunch of this stuff," he said. "Now we just jack up the risk, jack up the misunderstanding.

"We're throwing our money to the wind. We now know the defaults are in the mortgage pools and it's only a matter of time before they accumulate to levels that will threaten the CDO market."

Bear Stearns Cos., the fifth-largest U.S. securities firm, is hawking the riskiest portions of collateralized debt obligations to public pension funds.

At a sales presentation of the bank's CDOs to 50 public pension fund managers in a Las Vegas hotel ballroom, Jean Fleischhacker, Bear Stearns senior managing director, tells fund managers they can get a 20 percent annual return from the bottom level of a CDO.

``It has a very high cash yield to it,'' Fleischhacker says at the March convention. ``I think a lot of people are confused about what this product is and how it works.''

Worldwide sales of CDOs -- which are packages of securities backed by bonds, mortgages and other loans -- have soared since 2003, reaching $503 billion last year, a fivefold increase in three years. Bankers call the bottom sections of a CDO, the ones most vulnerable to losses from bad debt, the equity tranches.

They also refer to them as toxic waste because as more borrowers default on loans, these investments would be the first to take losses. The investments could be wiped out.

Fleischhacker, 45, says she doesn't associate toxic waste with the equity tranches she's selling. Pension funds in the U.S. have bought these CDO portions in efforts to boost returns.

Many pension funds, facing growing numbers of retirees, are still reeling from investments that went sour after technology stocks peaked in March 2000. Fund managers buy equity tranches, which are also called ``first loss'' portions, even though those investments are never given a credit rating by Fitch Group Inc., Moody's Investors Service or Standard & Poor's.

`I Have Trouble'

The California Public Employees' Retirement System, the nation's largest public pension fund, has invested $140 million in such unrated CDO portions, according to data Calpers provided in response to a public records request. Citigroup Inc., the largest U.S. bank, sold the tranches to Calpers.

``I have trouble understanding public pension funds' delving into equity tranches, unless they know something the market doesn't know,'' says Edward Altman, director of the Fixed Income and Credit Markets program at New York University's Salomon Center for the Study of Financial Institutions.

``That's obviously a very risky play,'' he says. ``If there's a meltdown, which I expect, it will hit those tranches first.''

U.S. home prices dropped 1.4% in the first quarter compared with a year earlier, the first year-over-year decline in national home prices since 1991, according to the S&P/Case-Shiller index released Tuesday.

A year ago, home prices were rising at an 11.5% pace. Prices have been falling for the past three quarters.

The Case-Shiller indexes cover three geographical areas. The national index is released quarterly, while the 10-city and 20-city indexes are released each month.

As a result of falling prices, foreclosures are rising nationally, especially in regions with a weak economy, such as the Midwest, and in the bubble regions of Southern California, Florida, Nevada and Arizona.

Thirteen of 20 cities in the Case-Shiller index have seen falling prices in the past year, led by Detroit (down 8.4%) and San Diego (down 6%). Home prices rose 10% in Seattle, 7.4% in Charlotte, N.C., and 7% in Portland, Ore.

Prices in Phoenix and Las Vegas, Nev., have fallen the furthest from their peak. After growing at a 49.3% pace in September 2005, home prices in Phoenix are now down 3% year-on-year. In Las Vegas, price gains went from 53.2% in September 2004 to negative 1.6% in March 2007.

Among other major cities tracked by the index, home prices are down 4.9% in Boston, down 4.8% in Washington, down 3% in Tampa, Fla., down 2.4% in Cleveland, and down 2.3% in San Francisco. Prices fell 2% in Denver, 1.9% in Minneapolis, 1.4% in Los Angeles and 1.1% in New York.

In addition to the price gains in Seattle, Charlotte and Portland, prices rose 2% in Atlanta, 1.6% in Dallas, 1.3% in Chicago and 1% in Miami.

The Case-Shiller index is considered a superior gauge of home prices compared to the median sales-price data released by the Commerce Department or National Association of Realtors, because it tracks multiple sales on the same property and is therefore not influenced by a different mix of homes sold in a period.

What the damnhellshit is going on...I am buying a house right now. I think I should just not watch the news. BTW, I dont care if the market tanks, I got the house that I could live in for 30 year, or until they plant me, whichever comes first.

The beleaguered housing industry is sending mixed signals, with sales of new homes surging in April by the biggest amount in 14 years while prices endured a record plunge.

Analysts said the price drop could provide evidence of builders’ desperation. They are looking to reduce a glut of unsold homes in the face of the worst slump in sales in more than a decade.

Analysts said the drop in home prices probably reflected efforts by builders to cut prices more aggressively to sell homes.

David Seiders, chief economist for the National Association of Home Builders, said he was looking for sales of new homes to fall by 18 percent for the whole year, matching last year’s decline.

Seiders said half of all builders report they are cutting prices; this comes on top of aggressive use of incentives such as free decks and kitchen upgrades in an effort to move homes. The inventory of unsold new homes fell slightly to 532,000 in April. It still would take six months to deplete this inventory at the April sales rate.

Seiders said the big drop in the median home price in April reflected not only significant price reductions on the part of builders but also a shift by buyers to homes at the lower-end of the price scale.

The slump in housing is the worst since the 1990-91 recession. Analyst said it probably would continue for several more months and that any rebound would be subdued, in part because mortgage rates have started to rise.

The mortgage company Freddie Mac reported Thursday its weekly survey found that the nationwide average for 30-year mortgages jumped to 6.37 percent this week, the highest level in seven months. The jump came as financial markets grew less optimistic about the possibility of rate cuts by the Federal Reserve.

Floyd Robinson, president of consumer real estate for Bank of America, says the company is able to offer "a true no-fee mortgage product" in part because of its sheer size -- $1.5 trillion in total assets, 55 million banking customers nationwide, and a nearly $350 billion portfolio of first and second home mortgages. That size allows it to create cost efficiencies and take over certain responsibilities that smaller institutions cannot.

Home loan industry competitors are searching for hidden gimmicks, but Bank of America insists that its "No Fee Mortgage Plus" plan announced early last month delivers exactly what the name implies -- without raising interest rates to applicants.

On a typical loan, these fees can amount to 3 percent to 5 percent of the mortgage amount, depending upon location, and run into the thousands of dollars.

Bank of America says it is so certain that its no-fee deal stacks up well against competitors' rate-plus-fee offerings that it is actively urging applicants to comparison-shop the market intensively, with Bank of America's quote in hand, before making a final commitment. If an applicant who is approved by the bank for a no-fee loan chooses to close with a competitor, the bank promises to pay that applicant $250.

The no-fee package also comes with a 25-day-or-less closing guarantee. If the closing occurs later than the deadline, the bank says it will pay the applicant's first month's worth of principal and interest.

Is this all for real?

Some limitations Bank of America includes in the fine print:

• You can't apply unless you already have an account with the bank, even if it involves minimal deposits.

• State and local transfer taxes, property taxes, and other government levies are not covered by the no-fee guarantee. Nor are prepaid interest or discount points, hazard or flood insurance and homeowner association fees.

• The program is solely for home purchases -- primary or second properties. No refinancers allowed.

After a Coconut Grove-based hard money lending company representing more than $263 million in loans missed its February interest payments to its hundreds of clients, it turned over its management to a restructuring specialist to deal with about 50 nonperforming properties.

Experts say the troubles of Mortgage Asset Management Corp. (MAMC) appear to be the tip of the iceberg for an industry that pooled private money to make high-interest loans, which carried more risk than banks were willing to accept. While smaller hard money lenders continue to offer loans, some groups that took on larger properties and accepted greater risks are struggling to manage their existing portfolios.

In April, foreclosure filings were up 65% around the nation, over this same time last year. In California, a foreclosure was filed for one out of every 400 homes in the state. And the situation is expected to get even worse, prompting a new effort to help people save their homes.

On Thursday was the first of it's kind brain-storming session that brought together leaders of financial institutions, community organizations and the federal government. They all agree something needs to be done to reduce the staggering number of foreclosures in the Central Valley.

Cristine Deberry, Center for Responsible Lending, says, "It's unprecedented and unfortunately unprecedented in a bad way and the amount of people that are expected to lose their homes and their equity will far exceed what we saw during the great depression."

That comparison may seem harsh, but recent statistics show just how severe the foreclosure crisis has become. One recent study ranked the 15 cities with the highest foreclosure rates in the nation.

Merced came in at number one and a total of five Valley cities made the top fifteen.

Allysunn Williams, Associate Director of Office of Community and Economic Development, Cal State University of Fresno, says, "The Valley has some very unique challenges given that we have and overbuilt housing supply, given that our wages are kind of depressed compared to other urban areas. We have one of the highest concentrations of poverty in the country."

As leaders searched for solutions, they focused on the sub-prime lending industry which in known for offering low interest "teaser" rates that vanish in a matter of months. Some want lenders to create a special kind of loan that allows those facing foreclosure to refinance into a more affordable loan.

Jeff Schrager, Community Housing Council of Fresno, says, "Maybe it means modifying their loan maybe it means refinancing their loan but time is their best asset and getting involved with a resource provider and a professional that knows how to help them."

And experts also say they need to do a better job of letting people know about existing programs. For instance, a new program called "no home owner left behind" offers a variety of resources aimed getting homeowners out of foreclosure status.

It doesn't take much. A layoff, an unexpected medical bill, or even a reduction in overtime.

With mounting expenses and flat or declining income, many Jackson County residents find themselves without much of a safety net when trouble hits.

They can quickly be buried in debt, forced to face the indignity of losing their homes.

The number of homes entering foreclosure in Jackson County has skyrocketed from 88 in 1997 to 874 in 2006. This year's number could break county records. More than 420 homes in Jackson County have been listed as foreclosed since January.

"The way things are, it doesn't matter what neighborhood you're in, there's probably a home that's been foreclosed on," said Jackson city Assessor Jan Markowski.

It could happen to anyone

The foreclosure process can start with two missed mortgage payments. Without funds to repay the debt, owners can lose their homes in three to 14 months.

On an episode of A&E’s popular reality series “Flip This House,” Atlanta businessman Sam Leccima sits in front of a run-down house and calls buying and selling real estate his passion.

Now authorities and legal filings claim that Leccima’s true passion was a series of scams that included faking the home renovations shown on the cable TV show and claiming to have sold houses he never owned.

“This is, indeed, a con artist,” said Sonya McGee, an Atlanta pharmaceutical representative who says Leccima took $4,000 from her in an investment scheme.

Look at this press release from Fitch. Though it is only dealing with one set of securitizations, Residential Accredit Loan, Inc., or RALI, it is interesting to see how many 2005 and 2006 deals are experiencing poor performance, and as a result, the lowest classes in those deals are being downgraded.

Just a reminder that the stress in lending is not limited to only subprime lending. All non-prime lending is affected. This is just a straw blowing in the wind… but I would lighten up on financial stocks with significant commitments to Alt-A lending relative to their overall book of business.

The nonprime mortgage business is in a mess because during the boom years, hardly anyone had an incentive to say no.

The people who take applications, the companies that lend the money, the appraisers who check property values, the investment banks that sell mortgages to investors and the investors themselves -- all had millions of reasons to keep mortgages flowing to borrowers who couldn't afford them. Each reason had a dollar sign attached to it. As long as each participant kept saying yes to risky borrowers, everyone made money.

"It's like we were originating willy-nilly, with abandon, and the consequences be damned," says Christopher Cruise, who trains brokers and loan officers. "As Americans, we're accustomed to not being told no. ... If we want to have a mortgage loan and we want it now, we don't want to hear about the potential consequences down the road."

That goes for borrowers and also for the players throughout the mortgage industry. The siren song of bountiful paychecks drowned out the murmurings of conscience.

"Are there individuals and folks in the supply chain here and there that don't care, or don't necessarily have the borrower's best interest at heart?" asks Jim Svinth, chief economist for LendingTree.com. "Yes. But that can be said about just about any industry where people are paid on commission."

Higher bond yields may at some point begin to worry Wall Street, but they aren't yet.

Good economic news lifts the Dow and S&P to fresh records, but holders of Treasury bonds are seeing red

The economic news keeps getting better for stock investors — but not for owners of Treasury bonds.

Upbeat reports on the economy sent major stock indexes to new all-time highs Friday, leaving the Dow Jones industrial average up nearly 10% year to date.

To Treasury bond investors, however, a better economy means a diminishing chance of interest rate cuts by the Federal Reserve. That is causing long-term interest rates to rise, devaluing older bonds.

But Treasury bond investors just keep seeing red in the economic trends.

"The message that the bond market took away from these data was that risk of a slowdown or recession is minimal and that growth will be maintained in the quarters ahead at a pace that will prevent the Fed from lowering interest rates," said Michael Moran, chief economist at Daiwa Securities America.

The benchmark 10-year T-note yield rose to 4.95%, up from 4.89% on Thursday and the highest since August.

Higher yields on new bonds push down prices of older bonds that pay lower fixed rates. The share price of the Vanguard Long-Term Treasury bond mutual fund fell to $10.78 on Friday from $10.84 on Thursday. The price was $11.30 in early March.

Rising Treasury yields also are pushing mortgage rates up, which is bad news for struggling home builders. Ryland Group fell $1.40 to $44.80. Hovnanian Enterprises slid $1.15 to $24.11.

But most stocks were higher Friday. Winners topped losers by more than 2 to 1 on the NYSE.

For the week, the Dow rose 1.2%, the S&P 500 gained 1.4% and the Nasdaq rallied 2.2%.

Experts say West Alabama’s home foreclosure rate is on the rise, and local leaders are trying to figure out a way to stop that trend.

Wednesday morning, the Community Service Programs of West Alabama brought together leaders from cities across West Alabama. They were looking at potential solutions for homeowners struggling to make their payments.

A bill that would have created a pool of money to help subprime mortgage borrowers facing foreclosures to refinance their loans died in the state Assembly Appropriations committee Thursday.

The measure, AB1538, was introduced by Assemblyman Ted Lieu, D-Torrance (Los Angeles County) in response to potential mass foreclosures of homes financed with controversial loans to consumers with little or subpar credit history.

Those consumers were granted mortgage loans that offered very low interest rates in the first few years before soaring to much higher rates, resulting in unaffordable mortgage payments and payment defaults for many of those borrowers.

AB1538 would have allowed some of those homeowners to refinance their loans with affordable interest rates by using a new fund created by tapping into the housing bond that voters approved in November, floating bonds in the future and asking banks that have large numbers of subprime customers who face foreclosure to pitch in.

Home prices falling: The worst of the housing price slump may not be over.

“This year, we’re going to see prices drop in every market across the country for the first time since the Great Depression,” said Steven Smith, a property appraiser and consultant from San Bernardino.

Smith predicted that home values throughout the country will fall 25 percent to 50 percent below what they were at their peak, which was in 2005 or 2006, depending on the region.

New home prices already have declined dramatically in the Northern San Joaquin Valley.

This March, the median-priced new home in Merced County was $310,990, which was nearly 22 percent below March 2006, according to Hanley Wood Market Intelligence.

In Stanislaus County, new homes sold in March with a median of $430,990, a 4.2 percent drop. In San Joaquin County, they sold with a median of $462,950, a 12.3 percent drop.

“Builders are continuing to lower prices and offer incentives to buyers,” said Joanna Terry, a senior manager for Hanley Wood Market Intelligence, a real estate research firm. In addition, she said, many builders are including upgrades without charging extra.

Used homes also are selling for far less this year compared with last.

In Modesto during the past six months, the median home sales price was about $322,000, compared with about $340,000 during the same period a year ago, according to the Central Valley Association of Realtors.

Vallejo is the Bay Area's version of ground zero for the subprime loan crisis.

A significant number of residents of the largely blue-collar city of 120,000 have taken out subprime loans -- expensive mortgages issued to people with poor credit.

In 2005, almost one-quarter of mortgages in the Vallejo-Fairfield metropolitan area were subprime loans, according to the Center for Responsible Lending's analysis of Home Mortgage Disclosure Act data.

Vallejo home prices fell 8.5 percent from November to March, according to DataQuick Information Services. For people who bought in recent months without putting any money down, that means they may owe more on their mortgage than the house is worth.

Real estate appraiser Todd R. Lackner's second job as mortgage fraud investigator began when he stumbled onto a suspicious-looking transaction while online one day last March, he said last week.

Within weeks, he was chest-deep in dozens of investigations of suspected mortgage fraud, and was helping federal investigators get the goods on real estate scammers who commit what are known as inflated-sale and-crash schemes, Lackner said.

The term refers to a scam in which a buyer ---- with the help of dishonest real estate agents and appraisers ---- purchases a home for more than market price, receives cash at the closing of escrow and then lets the property fall into foreclosure.

Lackner has uncovered more than 400 such cases, he said.

"I'm trying to nail (them,)" Lackner said. "Some of these people made well over a million dollars in a couple months time." He said he remembers well the day the first case came to light. He was doing an appraisal of a home in San Diego and was checking the sales information on comparable properties, Lackner said.

While checking comparable home prices in the same area, he said, he noticed that one of them had sold for $70,000 more than the listed price. So, he did a drive-by to check out the property, he said. There was no one living there, he said, and the house was run-down, with an overgrown lawn.

He realized immediately that something was wrong, so he went back to the office and began doing research on the real estate agent who had represented the buyer, Lackner said.

It turned out, he said, the man had been involved in the purchase of 17 properties over a period of just a few months. All of the sales were suspicious, because the sales prices were significantly higher than the list prices, Lackner said. Ten of the properties later foreclosed, he said.

"Then, I knew I was onto something," Lackner said. "I said, 'how can people get away with this?' " Those who are caught, tried and convicted will face many years in prison ---- as they should, said Lackner, who has worked as an appraiser since 1989.

Lackner added that he has turned all of the documentation on several real estate agents and their transactions to federal and state investigators or regulatory agencies.

Kunstler taking about making America "worth caring about". Genius Loci - "spirit of place" is all but gone in all of these new developments that are crashing. I don't want it at any price not even free.

With home sales in South Florida stagnant, inventories swelling and foreclosures rampant, large institutional investors should be poised to grab some incredible bargains by taking unsold condo units off developers' hands in bulk.

Not quite yet, say real estate analysts.

"We're all sitting on a volcano that's ready to blow at any minute," said Jack McCabe, whose Deerfield Beach-based firm, McCabe Research & Consulting, advises high-net-worth investors. "But the deals out there don't make sense yet."

That premonition is echoed by Glenn Caddy, whose Fort Lauderdale-based firm, Madison International Venture Partners, invests principally in pre-construction and condo conversion properties. "You can get good deals now, but I think you can get better deals in about six months' time," he said.

yeh they are being real cute trying to spread the risk around using derivatives.....but i don't think in the long run it will work......sooner or later, there is a end of the road and think that end is near, despite what the talking heads say....buy gold and silver and lots of it and bury it for a rainy day..........

How many average families will be buying the $500,000 starter home now that they see 15% annual appreciation is not the norm? Those sheep were expecting the $500K house to be worth $625K when the 2 year option-arm loan reset. It sucks when wet dreams don't come true. HAHAHAHAHA

Unless Bank of Japan start raising interest rate to control the massive liquidity being pumped into markets around the World, Stock Markets around World will have wild up and down as cash flow from one place to another looking for higher yields.

Yen "Carry Trade" needs to be controlled, BOJ do you job.

http://www.chinadaily.com.cn/bizchina/2007-06/04/content_886619.htm

Chinese Stocks plunge in panic selling

Chinese stocks plunged as jittery investors dumped shares in worries about further potential governmental moves to dampen the market following a stamp tax hike.

Investors were spooked by speculation on the collection of capital gains tax and on the abolition of tax on interest accrued from deposits. Taxation officials have rejected the rumor, but that did not seem to reassure the investors.

The Ministry of Finance denied an increase in stamp tax on trading on May 22, but then announced seven days later the tripling of the rate to 0.3 percent from 0.1 percent, triggering a 6.5 percent drop in the Shanghai Composite Index.

China will eventually start to levy capital gains tax on stock trading, said Hu Bing, an official with the China Securities Regulatory Commission Thursday in New York, according to earlier reports.

The lack of the duty lead to a widening of the gap between the rich and the poor, Hu noted. "However, phasing in capital gains tax is a long-term process as it is a major issue that depends on the development of the market."

The world's second-largest economy expanded an annualized 3.2 percent in the first quarter, according to the median estimate of five economists surveyed by Bloomberg News after today's survey, faster than the 2.4 percent initially reported.

Spending by Japan's largest companies rose to a record in the first quarter, indicating the world's second-largest economy probably grew at a faster pace than the 2.4 percent initially estimated by the government.

Capital spending climbed 13.6 percent in the three months ended March 31 from a year earlier, the Ministry of Finance said in Tokyo today. The pace was faster than the 10.1 percent median estimate of nine economists surveyed by Bloomberg News.

Sales and profit also surged to the highest ever as companies benefited from the economy's longest postwar expansion. The report is a key component in recalculating first-quarter gross domestic product scheduled for release June 11.

The spending plans released by the Finance Ministry account for about 60 percent of the corporate outlays portion of revised GDP. The GDP report on May 17 showed corporate spending, which is measured by capital goods shipments in preliminary calculations, fell 0.9 percent from the fourth quarter. Inventories subtracted 0.1 percentage point from growth.

Kiichi Murashima, an economist at Nikko Citigroup Ltd., and Takuji Aida, chief economist at Barclays Capital in Tokyo, also said the report shows GDP growth was stronger than estimated.

Wuffli gave Costas $3.5 billion, 80 top traders and 40 support staff for the Dillon Read Capital Management LLC venture. Costas hired another 130 people and leased space in London, Singapore, Tokyo, Connecticut and Manhattan, where his corner office on the 22nd floor has a view of St. Patrick's Cathedral. By the time he was done, Dillon Read's 250 employees received bonuses averaging $1 million a year, or almost three times the comparable payout at Goldman Sachs Group Inc.

Shareholders had no idea Dillon Read was anything but a success until May 3, when UBS suddenly pulled the plug.

As Costas expanded Dillon Read, shares of UBS slipped behind Zurich-based rival Credit Suisse Group and profit fell for the first time in four years. Now, as Wuffli spends $300 million to shut down Dillon Read, the fallout threatens to approach the damage from Long-Term Capital Management LP, the hedge fund whose 1998 collapse cost UBS $700 million and paved the way for its takeover by Swiss Bank Corp.

The yen's real trade-weighted value fell to a nearly 22-year low in May as Japan's low interest rates spurred carry trades funded in the currency while prompting domestic investors to seek better returns in foreign assets.

Bank of Japan data on Monday showed the central bank's index for the yen, after adjusting for the inflation rates of Japan and its major trading partners, fell to 94.9 in May from 96.6 in April.

That yen index fell to the lowest level since September 1985, the time of the Plaza Accord when the then Group of Five nations agreed to devalue the dollar against the yen and German mark to help reverse the U.S. trade deficit.

The BOJ's real effective exchange rate shows the yen's broad value has depreciated about 8 percent in the past year and 23 percent in the past three years.

Low financial market volatility has made investors comfortable borrowing funds in low-yielding currencies like the yen to buy higher-yielding currencies in the carry trade, just as Japanese households are increasingly investing funds in mutual funds featuring foreign assets.

At least 2 million homes, condos and townhouses will be foreclosed in the U.S. in the next two and a half years, accounting for the highest number of foreclosures since the U.S. Savings and Loan Fraud Crisis, according to a new forecast by Housing Predictor.

The forecast is based on an analysis of the nation’s largest 100 metropolitan real estate markets over the last month.

Housing Predictor.com forecasts more than 250 local housing markets futures in all 50 U.S. states and since it’s inception the web site has maintained more than an 85% accuracy rating.

Housing Predictor provides a detailed analysis of what is now a foreclosure crisis in many states.

Foreclosures are at record levels in Michigan, Minnesota, Ohio and Colorado. Other states that are experiencing the highest number of foreclosures include California, Alabama, Indiana and Mississippi.

The forecast comes on the heels of the Center for Responsible Lending’s estimate that 2.2 million residences will be foreclosed over the same period as a result of fall out in the wake of the nation’s sub-prime lending crisis.

The fall out from the sub-prime meltdown, however, has not extended into all of the nation’s housing markets on a widespread scale, researchers found.

Eighteen states local real estate markets are appreciating and an additional 10 states housing markets are showing signs of stabilizing.

The near record level of foreclosures are occurring as a result of increases in adjustable rate mortgages, and unethical lending practices on the part of some mortgage borrowers and lenders.

Researchers determined that the highest number of foreclosures are occurring in mortgages made to sub-prime borrowers, who obtained mortgages at higher interest rates as a result of poor credit histories and in two other areas of home lending. A break down is included in the Housing Predictor report.

Energized by low interest rates and liberalized lending standards, the nation’s housing market appreciated at record levels in many local markets for nearly five years only to come to a slow down in some areas.

Mortgages made to first time investors are also experiencing a high rate of foreclosures.

In March the U.S. Commerce Department said that vacant privately owned homes had reached their highest peak in the nation’s history.

Many home buyers purchased properties in hopes of making a quick profit by selling the property to a new buyer before the market reached it’s peak, and are now unable to rent or sell their properties.

The Illinois foreclosure rate has escalated 23 percent since last April, according to RealtyTrac, an online real estate marketplace that compiles foreclosure listings and data.

"Our foreclosure workload and files have increased this year from last year almost 100 percent," said Alex Attiah, principal broker of Reit Homes in Grayslake. "We're experiencing that in all of the counties in Chicagoland."

In April of this year, Lake County had 457 total foreclosures, 80 more than the previous month, according to RealtyTrac.

Although foreclosure totals conflict, there's no doubt the numbers are moving upward and there are plenty of contributing factors.

Lenders easing mortgage guidelines during the housing boom was the biggest culprit.

Widespread use of subprime loans helped fuel the housing boom during the first half of the decade, analysts say. However, by relaxing underwriting standards to increase mortgage sales, lenders also fueled a spike in foreclosures. Increasing defaults now threaten to create a drag on the economy.

Most troublesome are adjustable-rate mortgages (ARMs), which are prevalent in the subprime market. As ARMs reset at higher interest rates, many borrowers will miss mortgage payments, said economist Mark Schneipp of the California Economic Forecast. “The vulnerability will continue for a number of years, probably through 2008.”

At purchase, Benjamin Graham suggested a minimum Margin of Safety of 50%.

http://www.investinvalue.com/2/1/detail.php?ric=MBI.N

MBIA Inc. and Ambac Financial Group are exposed to the fallout in the subprime mortgage sector and that may prove costly for the bond guarantors' policyholders who are probably holding the ultimate risk and could end up with big losses, Bill Ackman, president of hedge fund firm Pershing Square Capital Management, said during a presentation this week.

Subprime mortgages are offered to poorer home buyers with blemished credit records. Rising interest rates and flat house prices have sparked a jump in delinquencies and foreclosures.

That's increased concern that losses will likely hit some of the riskiest parts, or tranches, of subprime mortgage-backed securities, or MBS. Then collateralized debt obligations (CDOs), which invested in some of the lowest-rated subprime MBS tranches, will feel the pain, experts worry.

The number of default notices in Gilroy nearly tripled in early 2007 compared to early 2006, according to a DataQuick Information Services analysis recently published in the Mercury News.

From January to March 2007, 62 Gilroy homeowners defaulted on their loans. The trend is driven by sagging home values, which have prevented owners from simply reselling their homes when overdue payments stack up.

The scene where Eddie Murphy and Dan Akrod just wait patiently and make a killing on the stock market for orange concentrated orange juice comdity market. Much like many HP'ers... just got to say (like Dan Akrod ) not yet, not yet.... Okay now. BUY EM

http://www.youtube.com/watch?v=u6oJZsFYy6U

Great quote from the movie;" that's not right.... how can the price be going down???...Something's wrong... Where is Wilson (Susanne)"

Bear Stearns Cos., the fifth-largest U.S. securities firm, is hawking the riskiest portions of collateralized debt obligations to public pension funds.__________________

++++I used to feel sad that I didn't have a pension, but now I'm thanking my lucky stars I'm not involved with one. It's obvious that most pensions will collapse before the majority of the Boomers retire....

That's an annual rate of almost 8% -- which means that with four to five years of such quarterly declines, the entire gains posted in the housing boom of the last 8 years would be wiped out.

2% per quarter decline is horrendously wealth-destroying. Not that I'd expect innumerate homedebtors to get it! Most of them don't have the $10K to $15K per month that such a decline would represent anyway.

The numbers looked compelling. Buy this investment-grade collateralized debt obligation and you will get a return of up to 10 percent, Credit Suisse Group said. That was almost 25 percent more than the average yield on a similarly rated corporate bond.

Investors snapped up the $340.7 million collateralized debt obligation, or CDO, a collection of securities backed by bonds, mortgages and other loans, within days of the Dec. 12, 2000, offering.

By the end of 2006, losses totaled about $125 million.

The failed Credit Suisse CDO may be an omen of far worse to come in the booming market for these investments.

"It's important to understand that unlike in the corporate bond market, in the securitization market, the rating agencies run the show," he said. "This is not a passive process of rating corporate debt. This is a financial engineering business."

As home buyers and investors grapple with the subprime mortgage crisis, many have not yet realized the extent to which that turbulence is spilling into CDOs. Foreclosure filings in the United States surged to 147,708 in April, up 62 percent from April 2006, as subprime borrowers stopped making mortgage payments.

As foreclosures increase, the subprime-backed securities in CDOs begin to crumble. Subprime mortgage securities make up about $100 billion of the $375 billion of CDOs sold in the United States in 2006. Investors have little idea how toxic some of these CDOs are, Mason of Drexel said.

"We compose CDOs with a bunch of this stuff," he said. "Now we just jack up the risk, jack up the misunderstanding.

"We're throwing our money to the wind. We now know the defaults are in the mortgage pools and it's only a matter of time before they accumulate to levels that will threaten the CDO market."

The Hong Kong Monetary Authority (HKMA) has warned about the dangers posed to the world financial system by the vulnerabilities of the U.S. economy, in a statement yesterday, the Hong Kong Standard reported. "A sudden and sharp depreciation of the U.S. dollar, the disorderly unwinding of global imbalances and a spillover of U.S. housing market weakness are external risks to the currency stability in Hong Kong. Financial instability and volatile capital flows are induced by an increased risk aversion of market participants and higher market volatility and the destabilizing activities of hedge funds," HKMA chief executive Joseph Yam Chi-kwong said in a report to the Hong Kong Legislative Council Panel on Financial Affairs.

Yam's warning points to those made by Lyndon LaRouche for two years against those bankers, elected officials, and economists who want to force China's currency dramatically upward; they are driving for a global dollar collapse and financial chaos. The HKMA recently decoupled the Hong Kong dollar from China's yuan, according to Yam, and kept it pegged to the U.S. dollar, though it has slid to the 22-year low end of its range against the U.S. dollar. Meanwhile, he said, the value of China's yuan has actually already risen 7% in two years. Now he is warning about "an asset bubble in China"; but clearly, Yam's real worry is of a U.S. dollar collapse and "an interest rate shock," with China tightening and raising interest rates even as the dollar plunges.

While Yam maintained that the economy of Hong Kong itself is "normal," he had warned in February, that efforts in Beijing to control liquidity and China's enormous trade surplus, means that "the economy may be faced with consequences beyond imagination, eventually."

Hong Kong, although only a "special zone" of China, has the eighth-highest amout of foreign exchange reserves in the world, $137 billion, more than either Germany or Brazil.

Mortgage lender Pro30 Funding said it plans to shut down within the next few weeks after laying off most of the 40 employees at its Novato headquarters.

President and owner Bill Coleman said that the company already closed offices in San Jose, Concord, Tampa, Fla., and Phoenix, Ariz. during the last two months.

According to Mr. Coleman, Pro30 Funding mostly originated "Alt-A" mortgages, loans in which the borrower does not need to provide documentation of income, assets or, in some cases, both.

Mr. Coleman said that only about 1 percent of the company's loans were subprime, but that many prime borrowers defaulted despite good credit.

"In the last six months, close to 15 percent of the borrowers opted not to make the first payment on their loans or defaulted after the first three months," Mr. Coleman said.

Mr. Coleman attributed the defaults to declining appreciation in home values, which he says led some new borrowers to stop making mortgage payments rather than paying more than what their house was worth.

"When the economy took a turn for the worst, people said 'I don't have any skin in the game. I'll live for free for six or nine months and I'll move on,'" Mr. Coleman said.

Pro30 Funding still has approximately three years left on the lease for its 22,000-square foot office at 88 Rowland Way, according to Mr. Coleman, who hopes to sublease the property.

Mr. Coleman's company, Kay-Co Investments, Inc. owns Pro30 Funding in addition to the related companies, Pacific Capital Mortgage and Silver Oak Realty. Mr. Coleman said he has not decided whether he will shut down those two companies, which combined have about five employees.

Governor Toshihiko Fukui warns that the Band of Japan will strike to avoid the blunders of the 1980s, when asset price went out of control. "We don't want to go through that bitter experience again," he said.

Mr Fukui flagged the danger of "extreme positions" and "one way bets" against the yen. This has not stopped speculators renewing their game of chicken, borrowing fistfuls of money in Tokyo to chase yields in Iceland, New Zealand or Brazil, or to buy ingots of platinum.

Officials at Japan's ministry of finance told me the "carry trade" had reached $500bn, roughly double previous estimates. True, much of this is "sticky". It cannot reverse quickly. This includes the steady outward flow by Japanese pension funds and insurance companies, as well as the cheap yen mortgages taken out by homeowners in Eastern Europe, Italy, Spain, and Portugal - cheap, that is, until the yen snaps back.

Less sticky is the money moved around by the army of day-trading housewives and grannies, the proverbial "Mrs Watanabes" who play the futures markets while their "salary men" drink sake with clients until midnight.

Least sticky is the $100bn "short" bets taken out by hedge funds and foreign banks. But does $100bn tell the story? The OECD uses a different measure, estimating carry trade positions on the derivative markets at $4 trillion for the yen, and $1 trillion for the Swiss franc, Europe's little sister, but not little for Switzerland. Welcome to leverage.

"The need to cover yen short positions in the event of a 'sharp yen appreciation' could amplify volatility in currency markets," said the OECD in a report. "Little is known about who actually bears the risk and the exact degree of market exposure of parties involved in complex carry trades. This may imply that a significant systemic impact could arise if any problem were to occur," it said.

Bears see the carry trade as a sword of Damocles hanging over global credit markets, threatening to pop the financial bubble at any moment. Perhaps.

The yen has almost halved against the euro since 2001, depreciating from yen90 to a record yen164 in late May. The distortion is even greater in real terms. Japan's retail prices have fallen 8pc since the slide into deflation at the end of the 1990s.

Trade-weighted, the yen has fallen to levels last seen before the collapse of the Bretton Woods system in 1973, even though Japan has a current account surplus of 3.9pc of GDP and sits on the world's biggest stash of net foreign assets ($1.8 trillion).

No surprise that Toyota has snatched the crown as world number one in car production, or that PSA Peugeot-Citroen is building its 4x4 sport models in Japan. The country's big seven car producers made windfall profits of $33bn last year.

Urgent OT News: Holy Shitaki Shrooms, HP'ers!!!!!!!Get Gas tomorrow. A cat 5 Hurricane is heading for the Straights of Hormuz, land fall Wednesday evening or Thursday.A Hurricane in The Middle east? Un heard of.They are trying to get the oil tankers out of the way.Have a look;http://roccland.blogspot.com/

Northen Virginia home prices are still sticky downwards..no panic here at all at least for single family home and townhouses. Townhouse Sh*tboxes build in the 1970's and 1980's near Vienna Metro in Fairfax Country are still $450,000. In 2002 they were worth $260,000 and with lower interest rates. Buying now would be stupid.

Retail food prices are heading for their biggest annual increase in as much as 30 years, raising fears that the world faces an unprecedented period of food price inflation.

Prices have soared as the expanding biofuels industry, climate change and the growing prosperity of nations such as India and China push up the costs of farm commodities including wheat, corn, milk and oils.

Few countries have not felt the impact of food price rises. In the US, prices have risen by 6.7 per cent, seasonally adjusted, since the beginning of this year, compared to 2.1 per cent for all of 2006, according to the Bureau of Labor Statistics. If prices keep rising at these levels for the rest of the year, it would be the biggest annual increase since 1980.

The UK’s consumer price index showed annual food price inflation of 6 per cent in April – its highest level in almost six years, and well ahead of overall inflation of 2.8 per cent. Food price inflation is lower in the eurozone at 2.5 per cent but still rising more quickly than overall prices.

In China, food costs are increasing more than twice as quickly as other kinds of prices, up 7.1 per cent last month compared to a year earlier. And in India, annual food price inflation has reached its highest levels since the late 1990s, climbing above 10 per cent year-on-year.

http://tinyurl.com/3azqre_____________________________

When the global stock market and housing market finally crash, will any of us Joe 6-packs have enough money to buy the groceries?

Phillip Contreras is accused of posing as a licensed real estate appraiser and forging his boss' signature on dozens of home appraisals.

Lt. Don gross, Fresno Police Department says, "...and what he was doing is using the company's license without the knowledge or approval of the company to do these appraisals around Fresno County and pocket the money and send the product on through."

Michael Keller, real estate appraiser, says, "It's happening all over the country right now." Keller is a certified appraiser in the business for 37 years. He says the real estate boom a few years ago forced appraisal firms to hire employees with no experience in the real estate field. "Now, things have slowed down, so these employees are without work, doing work on the side, forging the signatures of the licensed appraiser."

Funny how nobody notices that on the day before (last Friday) law enforcement "supposedely" busted the JFK terror plot, there was a stock buying frenzy of OSI Systems. OSI Systems is a supplier of security equipment for airports.

Good timing, huh? Someone (or some secret group) must have a crystal ball to know exactly when that terror plot would get exposed (on Saturday). The stock was dead for more than 6 months, but one day before the terror plot bust, some people decided to buy it like crazy and the stock price took off straight up. Here, check for yourself:

http://tinyurl.com/yqjr27

Nobody talks about it either. Like I said before, that terror plot was a set up to benefit a few, including presidential candidates. A low life drug dealer looking for a lighter sentence was the informant. That's what I call a reliable source!

So take your pick. Who knew in advance about that phony terror plot and bought all those stocks a day before the bust? CIA, Feds, Mossad, Secret Society?

Not all residents in Ward 5 have been criticizing Graham's proposal, and some say there is nothing to fear from the [adult] clubs.

Akua Osei-Bonsu and her partner, Rhonda L. Ward, bought a newly built three-story house for $515,000 about 18 months ago, just blocks from Love nightclub. The 30-something couple say they go to sleep with music blaring, and they are optimistic about the neighborhood.

-Washington Post, "NE [DC] Residences Fear Clubs Bill..."

Yeah, they're in financial trouble. There are about 100 homocides a year in that neighborhood and people are paying $515k to live there.

Question?when out in public i notice scores of people spending money like its endless. All kinds of people, rich,poor,whitetrash,and nothing seems to bother them. How long can this last. I see people who look like they dont have two nickels to rub diving a huge SUV, talking on cell phone with a $7.00 fast food lunch. I am not jealous just curious how americans spend so much money even now. I make a great income as does my wife and we have a low mortgage payment ($1100 PITI) and 2 paid for cars. We just dont get it.

You've probably heard that the average American carries more than $8,000 in credit card debt. I suspect it is much, much higher and growing daily...The habit/addiction is too entrenched and companies are happy to turn the profligate into slaves.

KAC/UCF and Chuck Watson are forecasting, based on their damage models, that the Qalhat (Sur) LNG terminal will be out for 20-30 days and the Mina al Fahal oil terminal will be down for 10-15 days--all of this assuming they are built to US standards.

The grand property at 33 Portland Place is one of the finest houses in London. A vast spread in the exclusive heart of the West End, it has played host to some of the most glamourous and best-known faces in the world, becoming a social setting unmatched in the city with spectacular scenery and a unique atmosphere.

Signs of Peak Oil: some "experts" from the International Energy Forum are saying that there will be some oil shortages this year and have asked OPEC to increase production.

If you start to see gas lines or any shortage whatsoever, it's Peak Oil at work.

Why do you think that Bush wants to put missile shields in Eastern European Countries? Because the US want to secure the oil fields from that region, by force, which are one of the few left. When oil shortages start to appear, there will be a run of developed nations to secure oil fields for themselves. That's why China is all over Africa already.

MUSCAT, Oman (AP) - Thousands of people fled low-lying areas Tuesday as the strongest cyclone to threaten the Arabian Peninsula in 60 years barreled toward the oil-rich Persian Gulf - with southern Iran next in its path.

Cyclone Gonu was expected to skirt the region's biggest oil installations but could disrupt shipping in the Straits of Hormuz, causing a spike in prices, oil analysts said.

This number is getting bigger every week! How can Bernanke say the economy will turn around in the "near term" when foreclosures are increasing at such a dramatic rate? Housing and automobiles are the biggest ticket items for consumers. Both are tanking fast and furious. What is the truth?

Ha ha look at all the losers in their little studio apartments with their ratty old futons left over from college and the plastic milk-crates full of scuffed up Beck and Matchbox 20 CDs (too poor to buy an iPod)...you are the same losers who were standing around the walls of the gym at high-school dances while the alphas were macking with the honeys...now the alphas all have homes and wives and families and you dorks are stuck with your ironic retro T-shirts and crappy little rental units...all you have is chicken-little complaints, hoping to see misery among the alphas you have always been jealous of but guess what McFly it isn't going to happen, you were slammed into the lockers back then and you'll get slammed now renting and renting and waiting for an opportunity and a "collapse" than never comes while the real men get richer and richer...too funny really.

BOJ out of controlled Yen Carry Trade not only pumped excessive liquidity into Dow Jones Industrial Average, but it has also dumped a great deal of liquidity into the manufacturing and service sectors surprising many financial analysts.

Now with a weaker housing market Ben Bernanke can no longer lower interest, but Ben Bernanke might even have to raise interest rate to ensure that the dollar do not suddenly collapse.

If investors begin to realize that "Bernanke the Dove" will let inflation get out of controlled, then treasury yields could return to the highs of the early 1980s.

Is there another solution - BOJ could start raising interest rate in July.

The dollar fell to a three-week low against the euro and a one-week low against the yen Tuesday as traders awaited central bank meetings in the eurozone and the U.K.

http://quotes.ino.com/chart/?s=NYBOT_DX&v=s

The dollar trimmed some of its losses after a report showed the none manufacturing side of the U.S. economy grew last month at the fastest pace in a year.

Bank of Japan governor Toshihiko Fukui said the central bank intended to adjust interest rates "gradually" as the economic fundamentals improve. "These adjustments assume no pre-set time frame," Fukui said in a speech to a bankers' conference in Cape Town, South Africa.

Fukui said monetary conditions in Japan "remain accomodative" given the slow pace of tightening to date. Fukui forecast a gradual expansion in the Japanese economy, saying growth in fiscal year 2008 should remain around 2%, which is slightly above trend.

Because of this above-trend growth, demand-supply conditions are bound to tighten further. Fukui forecast a consumer price inflation rate of 0.5% in the fiscal year.

today proved to me outside an event i see no way we drop much. the confidence in the market is un like any i've ever seen in 30 years. its much different than 99. its almost like private equity is udnerneath the market saying i dare you to drop the stock because i'll buy it so nobody sells.look how controlled the selling was today and we still have 5 or 6 nice bounces and actually regained 1/2 the lose from the lwos today. liek with rates rising we're not even falling so when rates stop rising guess what they rally us even more. its liek the bulls have check mate forever on bears

People spending money they don't have ... be thankfull (as I am) for not being one.

Question?when out in public i notice scores of people spending money like its endless. All kinds of people, rich,poor,whitetrash,and nothing seems to bother them. How long can this last. I see people who look like they dont have two nickels to rub diving a huge SUV, talking on cell phone with a $7.00 fast food lunch. I am not jealous just curious how americans spend so much money even now. I make a great income as does my wife and we have a low mortgage payment ($1100 PITI) and 2 paid for cars. We just dont get it.

You'll be effected negatively (your payments going up) over a long period of time.

Anonymous said... What the damnhellshit is going on...I am buying a house right now. I think I should just not watch the news. BTW, I dont care if the market tanks, I got the house that I could live in for 30 year, or until they plant me, whichever comes first.

I am *not* glad about the housing crisis for anyone involved (major mightmare for many), but I am glad that this bill was defeated.

This bill would not have been a solution, but just a temporary patch resoluting in only higher debt for those it was designed to "assist".

Anonymous said... Subprime borrower rescue bill is dead

A bill that would have created a pool of money to help subprime mortgage borrowers facing foreclosures to refinance their loans died in the state Assembly Appropriations committee Thursday.

The measure, AB1538, was introduced by Assemblyman Ted Lieu, D-Torrance (Los Angeles County) in response to potential mass foreclosures of homes financed with controversial loans to consumers with little or subpar credit history.

Those consumers were granted mortgage loans that offered very low interest rates in the first few years before soaring to much higher rates, resulting in unaffordable mortgage payments and payment defaults for many of those borrowers.

AB1538 would have allowed some of those homeowners to refinance their loans with affordable interest rates by using a new fund created by tapping into the housing bond that voters approved in November, floating bonds in the future and asking banks that have large numbers of subprime customers who face foreclosure to pitch in.

Phillip Contreras is accused of posing as a licensed real estate appraiser and forging his boss' signature on dozens of home appraisals.

Lt. Don gross, Fresno Police Department says, "...and what he was doing is using the company's license without the knowledge or approval of the company to do these appraisals around Fresno County and pocket the money and send the product on through."

Michael Keller, real estate appraiser, says, "It's happening all over the country right now." Keller is a certified appraiser in the business for 37 years. He says the real estate boom a few years ago forced appraisal firms to hire employees with no experience in the real estate field. "Now, things have slowed down, so these employees are without work, doing work on the side, forging the signatures of the licensed appraiser."

Carry trades make sense only if the investor assumes that the yen will remain weak.

If it appreciated, this would increase the repayment cost of yen-borrowing and offset the interest differential.

But such an assumption is dangerous when the yen is already so undervalued.

In theory, carry trades should not yield a predictable profit because the difference in interest rates between two countries should equal the rate at which investors expect the low-interest-rate currency, here the yen, to rise against the high-interest-rate one.

But the carry trade turns this logic upside down by causing the yen to fall, not rise.

This, in turn, lures more investors into the same strategy, amplifying the distortion.

Mr Paulson may be revealing more than he intends when he says the yen is “market-driven”: the market is chasing its own tail in defiance of the economic fundamentals.

The big story you should be talking about is the maniacal Chinese stock market. It lost $400 Billion just yesterday, the ROW didn't even hiccup. Then today it recovered more than half. All on central govt. threats and retraction of said threats.

I saw an awesome CNN clip showing a cabby giving market advice. Priceless....All the housewives and shoeshine men think it's Pai Gow time. Perhaps you know Asians are notorious gambling fiends. This is just another Pachinko game for them. The Commie Chinese govt. has no clue how to manage markets. The people are inexperienced gambling buffoons.

A secret behind Wal-Mart’s rapid expansion in the United States has been its extensive use of public money. This includes more than $1.2 billion in tax breaks, free land, infrastructure assistance, low-cost financing and outright grants from state and local governments around the country. In addition, taxpayers indirectly subsidize the company by paying the healthcare costs of Wal-Mart employees who don’t receive coverage on the job and instead turn to public programs such as Medicaid. This website brings together available information on both kinds of subsidies involved in Wal-Mart’s “double-dipping.” In the future we will add data on other ways Wal-Mart relies on taxpayers to finance its growth.

Interesting comparison from Time magazine called "What The World Eats", which shows pictures of what families eat around the world per week, along with cost. Just look how much junk food the Americans & Brits eat per week...crazy! Also, the German family spends a ton of money in food and beer per week.

CNN had a post-debate comment page up, and removed it after there was overwhelming support for Ron Paul.

Be afraid, neocons.

Be very afraid.

http://tinyurl.com/39ah83

No one is orchestrating anything.

There is a groundswell of grass roots support for Ron Paul, and it's showing up on the Internet first because of the speed with which information travels via this medium. It's only a matter of time -- a SHORT amount of time -- before Ron Paul's supporters are massing face-to-face and busting some gates down.

A warrant served at the 2,700-square-foot Ormond Beach home of James A. Kelly last week was just the start in a state investigation of real estate fraud for peddling "paper subdivisions" in wetlands to unsuspecting victims, mostly from South Florida.

The locations of the sales, in vast water recharge areas east of DeLand off U.S. 92, are called University Highlands and Cape Atlantic, according to an affidavit filed by the state Attorney General's Office this week in circuit court.

Among real estate transactions Kelly handled, records show Beata Jeune of Spring Valley, N.Y., bought five acres from him for $32,000 in August 2005. But the land has a listed value of $2,500, according to the Volusia County property appraiser.

Nearly two dozen sales by Kelly's Ormond Beach company, Volusia Wholesale Land and Property Investment, could lead to charges of grand theft and/or organized scheme to defraud, according to investigators and court records. Little comment was available Thursday.

"It's an active, ongoing investigation," said Susie Murphy, a Florida Department of Law Enforcement spokeswoman. To date, no criminal charges have been filed against Kelly.

Marketing such properties is nothing new; books and newspaper stories have been printed on the subject statewide since at least the 1960s. The same hooks for speculators and dreamers remain, but the Internet has made it easier to reach out to faraway buyers. Kelly used the Ebay Internet auction site to make some sales, officials said.

According to the affidavit, Kelly's company used his Web site to drum up sales of properties here and statewide, totaling $2.4 million in deposits to his bank accounts between March and November 2005. Many buyers were from the Palm Beach area.

Kelly bought the land in different transactions, including a purchase in July 2005 of 1,200 acres for $1.3 million. About 15 to 20 acres of that was in University Highlands, records show. Kelly is being investigated for then selling the "low wet land" for "many times what the property was worth," the affidavit states.

Some evidence shows Kelly paid more for some of the University Highlands property than it was worth, the affidavit states. Among allegations raised in the affidavit, Kelly wasn't registered with the state to sell subdivided property.

Several buyers claimed they were bilked; buying without seeing the property and only learning they could not build on the sites after they had paid. And when they tried to get answers from Kelly, the report states, their calls went unanswered.

All said they would not have bought the land if they knew they could not get building permits for the lots, the affidavit states.

Some, according to the affidavit, claim Kelly got angry when they asked "why he was doing business on the side of the road."

"All the individuals who questioned Kelly felt extremely pressured to make the purchase," the affidavit states.

On his company's Web site, potential buyers are told pictures of parcels are taken from "airial (sic) photos from the Volusia County website (sic)." There is also a link: CLICK ON THIS TEXT TO SEE PICTURES OF WHAT YOUR MONEY IS DOING FOR HAITI.

Then, the disclaimer.

"We have not visited all of the lots we own and are making no representation to the condition or buildability of these lots, as some of the lots we sell are raw virgin uncleared lots without road access and/or utilities."

"Please be sure before making a purchase to do your own due diligence."

A man identified in court records as Antoine Joseph bought several parcels from Kelly, and then started to find buyers for a referral fee. Joseph, who records state later learned he could not get a building permit for his purchase, could not be reached Thursday.

Jeune of New York did not return a message left at her home.

Records show Kelly had paid in full for the cars and custom motorcycle that were carted away by officials last week.

Court documents say the property was seized under state law because it was used in commission of a felony or otherwise acquired with illegally obtained money. Kelly referred calls to his attorney.

Typically its been the lower end properties that have been foreclosing but check out the condo market in FLORIDA. And for those that think waterfront property is immune, this article should cast significant doubt on that theory.

http://tinyurl.com/2tyynq

Exacerbating the problem are amazing quantities of additional condos getting built. There must be a way to short this is in the stock market. There will be dozens of builders going belly up in Florida which means MORE layoffs and local small banks going belly up.

If you guys help that Casey moron to make more money with the site, you are a moron yourselves. That guys just trolls, can't you see it? Now that Russian con artist wants to make money with the site, while the creditors get screwed.

There's nothing else to say. All his properties foreclose, he's not paying any debt, and the rest is trolling. He's going to be making up crap to piss Haterz, BSing about phony conflicts with his partner in crime G, etc. All this without ever looking for a job and making money off your backs.

This is just another example of the "reliable sources" used by law enforcement to bust terror plots, like that phony JFK one created to help Giuliana look good with the sheeple. In that case, the informant was a low life drug dealer with a long rap sheet, who was trying to get a lighter sentence by framing anyone that came across. Do you believe them?

(Wired News) Brett Shannon Johnson is a credit-card and identity thief. In five years of crime, the 37-year-old estimates he's stolen about $2 million -- some of it while working as a paid informant for the U.S. Secret Service.

Johnson, a well-known figure in the online carding community who went by the nickname Gollumfun, worked undercover for 10 months in the agency's Columbia, South Carolina, office helping catch other card thieves. Then last year agents discovered his two-timing, and he went on the lam.

The case sheds light on some of the risks and ethical trade-offs involved in using criminals as informants.

While working for the agency, Johnson purchased several computers using stolen credit-card numbers and filed more than a hundred fraudulent tax returns in other names. He says he got the numbers and names while working on a laptop in the Secret Service office. Although everything he did on the computer was recorded with screenshots and a keylogger, he says agents were often distracted by other things and only reviewed portions of the audit trail he advised them to review.

The euro dropped against the yen on Wednesday after the European Central Bank gave no clear indications about the outlook for interest rates beyond 2007 while global equity market weakness broadly lifted the Japanese currency.

Equity weakness prompted investors to unwind trades financed by borrowing yen at low Japanese interest rates, a strategy known as the carry trade, analysts said. The Morgan Stanley Capital International gauge of world stock markets fell 1 percent, the largest single-day decline in a month.

BOJ needs to control the unwinding of the yen carry trade and not let market forces do it in an uncontrolled manner.

When economic growth is underwater, stock market should not be flying-high.

This week event caused by the ECB is just a warning shot across the bow.

Any break in the liquidity chain will send markets into downward spiral.

The likely catalyst for such a crash could be contagion from the housing bubble creeping into the stock market, a sudden unexpected increase in Japan's interest rates or a sudden unexpected decrease in ECB interest rate.

Any one of these could potentially trigger a massive sell-off on Wall Street.

Inflation is surfacing in all the countries where the stock markets are soaring because of their increases in the money supply.

When the central banks are finally forced to raise interest rates; money will tighten up, it'll be harder for creditors to make their payments or for banks to issue additional loans.

As credit dries up more people will default on their loans, demand will drop off for consumer goods, prices will fall, and we will go into deep recession.

Once this process begins, speculators will be forced to abandon their positions, liquidity will continue to evaporate and the market will go into freefall.

Markets are self-correcting. Eventually the overleveraged debt-instruments, which pushed the Dow to historic highs, will be expelled from the system, but not without considerable pain for everyone involved.

The bottom line is that we are buried beneath a $9 trillion mountain of debt and there's no way to dig out. If there's a break in the liquidity-flows to our stock market — stocks will crash, unemployment will soar, and we'll be pulled into a deflationary downspin.

A Fed policy maker who has long championed globalization's influence on U.S. inflation says that influence has gone from good to bad.

Fed Fisher: I sense that global capacity has moved from being a tailwind to a headwind in terms of inflation control.

I don't know with mathematical precision the intensity of those headwinds, but I do sense the winds have shifted.

Both import prices and the reports I get from global business operators indicate that globalization may well be imparting upward pressure on prices.

What I'm picking up from my contacts around the world and not just among U.S. companies, is that there is pricing "temptation." Before every FOMC meeting, I consult among a group of some 50 CEOs whose operations have a global footprint.

What I've been hearing over the last several months, particularly the last six months or so, is that global operations are no longer a source of disinflation in the U.S.: capacity constraints and price pressures are being felt, from commodities to shipping resources to a shortage of high skilled workers, globally.

They see it reflected in import prices, which have begun to move in an upward direction.

There is a sense things are more expensive because other countries are growing and straining against capacity constraints.

The prices of some tasks that are allocated to overseas sources are more expensive. More and more, I hear people complain about the rising costs of Indian MBAs or the wages paid to Chinese workers.

Even with five top model segment awards American Auto manufacturers still can not compete with Japanese Auto manufacture if BOJ holds its interest rate low to manipulate the yen.

http://sev.prnewswire.com/auto/20070606/LAW12506062007-1.html

Ford Motor Company garners five top model segment awards -- more than any other automobile corporation this year, according to the J.D. Power and Associates 2007 Initial Quality Study(SM) (IQS) released today.

The subprime loan bubble is not dead. It just moved over to the stock the global markets.

Unless BOJ control excess global liquidity by raising interest rate to stop the out of controlled yen carry trade, excess global liquidity will move through the path of less resistance and find another hard asset to pump up.

Japan's bonds fell, pushing 10-year yields to the highest since August, on speculation a report tomorrow will show machinery orders rose the most in 10 months.

Debt declined before the Cabinet Office report that may show orders for April ended two months of declines, according to a Bloomberg News survey. Government data earlier this week showed business investment increased to a record, signaling growth may be accelerating in the world's second-largest economy.

``The bearishness in Japan's bond market does not stop,'' said Kotaro Morota, a fund manager in Tokyo at the Pension Fund Association, which has more than 1,600 corporate funds as members. ``I anticipate yields will head higher.''

Morgan Stanley has advised clients to slash exposure to the stock market after its three key warning indicators began flashing a "Full House" sell signal for the first time since the dotcom bust.

Morgan Stanley has advised clients to slash exposure to the stock market after its three key warning indicators began flashing a sell signalMorgan Stanley warns the 'mid-cycle rally is over'

Teun Draaisma, chief of European equities strategist for the US investment bank, said the triple warning was a "very powerful" signal that had been triggered just five times since 1980.

"Interest rates are rising and reaching critical levels. This matters more than growth for equities, so we think the mid-cycle rally is over. Our model is forecasting a 14pc correction over the next six months, but it could be more serious," he said. Mr Draaisma said the MSCI index of 600 European and British equities had dropped by an average of 15.2pc over six months after each "Full House" signal, with falls of 25.2pc after September 1987 and 26.2pc after April 2002. "We prefer to be on the right side of these odds," he said.

The first of the three signals Morgan Stanley monitors is a "composite valuation indicator" that divides the price/earnings ratio on stocks by bond yields. It measures "median" share prices that capture the froth of the merger boom, rather than relying on a handful of big companies on the major indexes.

"If you look at all shares, the p/e ratio is at an all-time high of 20," he said.advertisement

The other two gauges measure fundamentals such as growth and inflation, as well as risk appetite. "Investors are taking far too much comfort from global liquidity. Markets always return to fundamental value, so people could be in for a rude awakening. This is the greater fool theory," he said. "The trigger may be rate rises by the Bank of Japan, or a widening of credit spreads. There are lots of little triggers."

Morgan Stanley is not predicting a recession, believing bond yields will fall during a correction and act as an "automatic stabiliser" for the world economy. Once the market shakes off the latest excesses, it's back to the races.

It doesn't sound believable because you don't want to believe, sheeple. Here's the link:

www.aceee.org/press/e075pr.htm

The link for the complete report, under PDF format, is in the article also, but you can download directly from here, if yo wish:

www.aceee.org/pubs/e075.htm

But we know that after you read all that mountain of comprehensive evidence, done by renown scientists, you will come up with an excuse or will brush aside. After all, you are just another red neck neocon drop out who doesn't believe even in evolution, right?Blue states carry this country on their backs.

Construction workers are going home (accross the border). You won't see this in the statistics. No more MEW means fewer remodles and fewer trucks on the streets. It is getting much quieter in my neighborhood.

US construction data clouds productivity picture Financial Times

Updated: 23 minutes agoA conundrum in construction lies at the heart of a US jobs market puzzle that continues to baffle economists – including officials at the Federal Reserve.

After a year of sub-par growth unemployment is a mere 4.5 per cent. With jobs growth strong but output growth weak, productivity looks very poor.

Most economists think about these questions in whole-economy terms. But much of the explanation may lie in the single sector at the heart of the housing-driven slowdown: the US construction industry.

During the past year residential construction activity has plunged, but employment in this sector has hardly declined at all – at least according to the official statistics.

The Bureau of Labor Statistics payroll survey shows total construction employment and residential construction employment down just 2 per cent year on year in May, the latest month for which figures are available.

The absence of the expected drain of net job losses in construction is the single biggest reason why overall job gains remain so strong – 157,000 in May – and unemployment remains so low.

This has come as a big surprise. Even the generally upbeat Federal Reserve was expecting tens of thousands of net job losses in construction to hold down overall jobs gains and result in a gradual moderate rise in unemployment.

With activity down, but employment and hours worked little changed, measured productivity in the construction industry has collapsed since last summer.

Strip out this sector, and the rest of the economy's productivity performance looks significantly less bad.

There are a number of possible explanations.

One is that companies are hoarding labour in expectation of a rapid rebound in the housing market. This looks increasingly implausible as the housing correction drags on.

Another is that there is a time lag in construction and big job losses are just around the corner.

There may be some truth to this. But the slowdown has already been under way for a long time.

New home starts peaked in May 2005. The 12-month rolling average (new starts over the preceding 12 months) peaked at 2.1m in March 2006 and has since fallen to 1.6m.

If it all fails to add up, the answer may be that the official statistics are not accurately capturing what is taking place in an industry that employs both a large number of small subcontractors and a large number of illegal immigrants. Specialty trade contractors – who work for small subcontracting firms – account for nearly two-thirds of all construction jobs. These workers tend to belong to small, often informal businesses.

The payroll survey is likely to understate the extent to which these workers have switched from the residential sector to fast-growing commercial construction.

David Seiders, chief economist at the National Association of Home Builders, says the BLS assumes that contractors' hours rise and fall with those of residential building workers, whereas builders in practice let their contractors take the pain when business is slack.

If he is right, the decline in productivity in construction – and across the whole economy – may be smaller than the official statistics suggest. "What we are seeing may be under-employment rather than unemployment," he says.

The separate BLS household survey does show a 300,000 increase in the number of people working part-time for economic reasons over the past year.

The labour market statistics may also be missing a big decline in work by illegal migrants, who make up perhaps 20 per cent of the construction workforce.

If property is as grossly over-valued as it is now, it will comedown in price - regardless of location.

Guy Daley said... SCHADENFREUDE!!!

Typically its been the lower end properties that have been foreclosing but check out the condo market in FLORIDA. And for those that think waterfront property is immune, this article should cast significant doubt on that theory.

http://tinyurl.com/2tyynq

Exacerbating the problem are amazing quantities of additional condos getting built. There must be a way to short this is in the stock market. There will be dozens of builders going belly up in Florida which means MORE layoffs and local small banks going belly up.

Excerpt:Immigration is one of those areas where public and elite views differ widely (for instance, see here and here). But most of the time that doesn’t really matter, because immigration seldom ranks high enough in voter concerns for politicians to take much notice. This gives lawmakers and bureaucrats a relatively free hand to cater to the preferences of businesses and racial-identity groups and anti-borders activists in promoting ever-higher immigration levels and ever-looser enforcement.

The role of blogs and columnists and think tanks in fueling and directing this outrage was essential...

http://tinyurl.com/2c53az

Let's not stop the fight! Take back America! The next step is to pressure enforcement of CURRENT LAWS. I live in the DC area and wonder if anyone can give me some advice on making my voice louder? Should I carry signs around K street? Capital hill? Or is this something that should be done in my local neighborhood going door-to-door? Please, real world advice needed.

Let it go...didn't I say that he was going to come up with an excuse or brush aside the mountain of evidence?

If you had accessed the link to face reality, you would notice that the report is NOT from Money Magazine. The report is from a unbiased and reputable scientic consortium. Don't look for excuses because there aren't any. Go to the site and check the facts!

Funny, I bring data, solid evidence, mention sources, and then these Republican neocons just brush aside without backing up with ANYTHING. All they do is deny it. You guys look so dumb when you do that...you have no idea!

I've been watching the news and reading the papers, and Re-litters are always talking about fantastic "Properties"...what happened to "Homes"...that little change in vocabulary is a big problem...a property is an investment, a home is something you live in.

What Will the Fed Make of the US Bond Market Panic? / Interest-Rates / US BondsJun 08, 2007 - 04:09 PM

By: Adrian_Ash

"...If US consumers and Washington can't borrow cheap at the long end this summer, then they'll just have to get cheap money at the short end instead..."

"POSSIBLY THE EASIEST act for any human being is to spend money which does not belong to him," wrote Robert L. Smitley in his 1933 classic, Popular Financial Delusions .

The only thing easier, in fact, is lending money that's not yours and earning a yield on the profit or loss either way. "Almost anyone will risk funds in an enterprise when the funds are not his own," Smitley went on during the Western world's last Great Depression. Hence today's bubble in all assets.

Over the last four years, private equity funds the world over have come to bid up shares regardless of value. Hedge funds have pushed junk bonds so high, they yielded record lows above Treasuries at the end of last month. Outstanding bets on derivatives contracts now outweigh the entire global economy eight times over, according to the latest BIS and IMF data.

What might happen if a handful of these credit-fuelled promises fails to pay up? Perhaps we got a glimpse this week, when yields on 10-year US Treasury bonds – the global benchmark for the price of money ever since gold was cut out of the monetary loop – rose above 5% for the first time since August.

That move in the medium-term price of Dollars came thanks to Treasury prices falling, of course. And with the value of risk-free investments sinking, higher-risk assets sold off fast, too.

"Everything has to do with interest rates at the moment," gasped one credit trader at J.P.Morgan to Bloomberg. "People are reducing their high-yield holdings in light of the risk-free rate at 5%."

By the close in Frankfurt on Thursday, the Eurofirst 300 index had lost 1.1% for the day. The S&P on Wall Street dropped 1.8%. Gold priced in Dollars fell 1.7% to a one-week low before sinking another $20 on Friday to undo the last three months of gains.

Over in Tokyo , Japanese real-estate trusts sank by 4.1% on Friday, driven lower by fears that the price of Yen might have to rise from its current half-a-per-cent per year. The yield on five-year Japanese government bonds, first launched 7 years ago, rose to an all-time high of 1.525% as equities plunged. Two-year JGB yields have now broken above 1% for the first time in 10 years.

But if those yields still sound absurdly low to you, just recall that until late last year the Japanese government was actually giving money away. The legacy of its "zero interest rate policy" – known as "ZIRP" as in "burp" – has helped push the Yen to record lows on the currency markets, just as the Ministry of Finance intended.

Tokyo wanted to revive Japanese export sales by devaluing the Yen. But China spotted the game, and got to work devaluing the Yuan too, keeping interest paid on deposits below 2.0% while inflation rose nearly twice as fast. The price of Euros was slashed so German exports could compete, rates on the Pound Sterling fell to a half-century low, and US Dollars went on sale at an "emergency" price of just 1%.

Hence ZIRP caused indigestion in financial assets the world over. Bloated on cheap money borrowed at no cost, anything outside the Yen looked to be a no-brainer investment – and brainless investors couldn't get enough of it.

Japan 's monetary antics were extreme, but they were by no means unique. The Yen simply offers us a 'limit case' in today's worldwide cheap-money bubble. For while no other currency quite got to ZIRP, the price of money around the world remains "benign" even after the Fed's 17 hikes in the cost of Dollars. J.P.Morgan Chase now puts global interest rates just below 4.7%. Based on the rates charged by 31 central banks, that figure stands well below the 7.02% level of seven years ago.

Spooked by that peak in the cost of money in Nov. 2000, global economic growth slowed by one-half – and we all know what happened to stocks.

So too, of course, does Ben Bernanke.

What will the Fed chairman make of this week's panic on Wall Street? Well, inflation expectations are "well contained" said Michael Moskow, president of the Chicago Fed, in a CNBC interview Friday morning. But "that doesn't mean we're not concerned about inflation. It doesn't mean that we don't think inflation is the predominant risk going forward."

Put Moskow's comment into context – the context of this week's bond-yield panic – and you'd be forgiven for thinking the Fed is happy to see Wall Street hiking long-term rates at last.

After all, no one believed Bernanke was serious when he raised short-term rates 17 times in two years – least of all bond investors, leveraged hedge funds, and speculators in the gold market. Only the sub-prime mortgage market fell for the Fed's "tough on inflation" play-acting. Now the bond market's caught up, however. Should the sell-off in 10-year US bonds continue next week, the yield curve threatens to flip itself right-side up – and stay there – with a vengeance.

The yield curve might even steepen, in fact – making long-term money much more expensive than short-term debt. Most especially if the Fed seizes this chance to start cutting short-term borrowing costs once again.

“Our objective is to have maximum sustainable growth and price stability,” Moskow went on. “We look at the entire economy. We look at the financial markets as part of that.

"We look at all this data and then decide what's best for the American people.”

You won't have the Fed to kick around, in other words, if it was the bond market that raised the cost of borrowing. And now that all the cheap money's piled up – on Wall Street, in home prices, junk bonds, fine art and mortgage-backed notes – what's best for the American people will soon come to look like lower Fed rates. Because if Washington and the US consumer can't borrow cheap at the long end, then they'll just have to go to the short end for cheap money instead.

And as the Fed gets busy destroying what's left of the Dollar, gold below $650 today could soon come to look like the sale of the century.

"It was a mess," said Carlton. "In Butte County in Northern California, there were boarded up homes all over the place. People just abandoned them and there were no standards for cleanup."

Although much meth production has moved to Mexico, Carlton said meth labs in California continue to be a problem. Historically, San Diego has been known as the meth capital, but Carlton says that recently Fresno is vying for that dubious distinction.

"But it's happening everywhere," she adds. "Even in the highest-grade properties. It used to be that it only happened in rural or suburban areas because you can smell it, but now they've gotten very efficient at piping smells off site."

"The problem is that for every pound of meth, 5 pounds of toxic waste are produced," said Joe McGurck, spokesman of Environmental Data Resources, a company that offers environmental reports based on public databases. "These guys aren't good guys, they aren't taking it down to the toxic waste dump. They're dumping it in the backyard."

"The other reason that meth is so dangerous is vapor intrusion," explains Jeff Doerner, western regional director of the environmental data company. "They cook under pressure and it creates very toxic vapors that penetrate Sheetrock, electrical conduits, wood and flooring, making them extremely contaminated for children and elderly folks."

Pacheco said the lab leftovers were likely dumped sometime overnight. He said the department has no suspects, but that evidence gathered from the site could provide valuable clues.

"They usually leave something behind that we can trace back to them," said Pacheco.

Members of the Fresno County Sheriff's Department's methamphetamine task force were called to the site to help collect and catalog the materials soon after they were discovered. Deputies clad in white plastic suits and gas masks worked at the scene for several hours.

Fresno County Sheriff's detective John Wages said he estimates that those who dumped the items produced about 10 pounds of meth. That translates to a street value of about $170,000, he said.

COLUMBUS, Ohio (AP) - Attorney General Marc Dann has sued 10 mortgage lenders, accusing them of pressuring real-estate appraisers to inflate home values -- a practice Dann said left an increasing number of Ohio borrowers with homes that can't be sold and loans that can't be refinanced.

Dann on Thursday asked courts in four Ohio counties for orders blocking the companies from engaging in what he deemed illegal practices in a state that has one of the highest foreclosure rates in the country. He also demanded that lenders pay $25,000 each in civil penalties to reimburse consumers.

'Predatory lending is driving Ohio's shameful home foreclosure rate,' Dann, a Democrat, said in a statement.

The filing comes as foreclosure activity continues to surge in Ohio, according to RealtyTrac Inc.

It said foreclosure filings jumped 39 percent in April compared with March and were up 135 percent from April 2006, making the total the third largest in the nation. The state reported 11,431 foreclosure filings -- default notices, auction sale notices and bank repossessions -- during the month, a foreclosure rate nearly twice the national average, according to RealtyTrac.

Dann accused the lenders of violating the state's Consumer Sales Practices Act, which went into effect Jan. 1 and gives the state the right to sue lenders to stop fraudulent practices.

The law polices subprime loans, which generally carry interest rates higher than 8 percent and are designed for people who can't qualify for traditional mortgages because of low income or poor credit. It bans practices such as switching loan terms at the last minute or coercing appraisers to falsely inflate home values before making a loan.

Lawsuits were filed in Franklin, Belmont, Butler and Hamilton counties against six Ohio lenders, two California lenders and one lender each from Arizona and New York. The lawsuits were based on complaints from borrowers, Dann said.

Hedge fund managers are accusing Bear Stearns Cos. of trying to manipulate the market in securities based on subprime mortgages, the Wall Street Journal reported in its online edition.

The confrontation provides a rare look into the complex trading in the mammoth U.S. mortgage market, which played a critical role in financing the housing boom, and the complicated relationships between hedge funds and investment banks, the paper said.

Hedge funds that had sold short such securities made profits when an index tied to a basket of subprime bonds was falling. But the index has recovered in recent weeks, leading to howls of protest from hedge funds, according to the report.

The chief critic, John Paulson of Paulson & Co., a $12 billion fund, says Bear Stearns wanted to prop up faltering mortgages-backed securities by purchasing individual mortgages that were rapidly losing value to avoid doling out billions in swap payments, the Journal reported.

Bear Stearns is one of Wall Street's largest players in the market for credit default swaps. By selling swaps, Bear bet the subprime home loan market would improve or at least turn out to be healthier than expected.

Neither Bear Stearns nor Paulson & Co. immediately returned calls seeking comment. The head of Bear's mortgage business denied the allegations, according to the report.

A downturn in the U.S. housing market this year has led to rising defaults in the subprime mortgage market, which caters to borrowers with weak credit histories. More than two dozen subprime lenders have collapsed, while others have tightened their lending standards.

Currently, nearly 3% of the homes for sale in Southern California are owned by lenders, according to home-search website ZipRealty, up from less than 1% a year ago.

"Volumes are increasing, definitely," said Patrick Carey, the executive in charge of foreclosed properties at Wells Fargo & Co.'s real estate division. The San Francisco-based bank is managing more than 800 bank-owned homes for sale in Southern California.

During the real estate downturn in the 1990s, lenders eager to unload foreclosed properties sold them at steep discounts — helping lower values overall, Kleinhenz and others said.

So far in the current cycle, lenders aren't offering fire-sale prices, but that could change if sales remain slow and lenders slash prices to clear their inventories.

"Like any seller, they have a cost to carry," said Mike Ela, founder of home-valuation service HomeSmartReports.com "Eventually they will feel the heat of having a nonperforming asset on their books and lower the price."

Lenders, however, say they are being careful to ensure that doesn't happen.

"The impact on the neighborhood and the community is vital with us," Carey said. "We don't want to flood a community with below-market-priced homes and cause further deterioration."

One study suggests that discounts are likely to become common if foreclosures — which increased 18% in Southern California from March to April alone — keep rising.

Owners are likely to discount their asking prices 20% or more in communities where foreclosed homes make up 8% or more of sales, according to the study by Christopher Cagan, an economist with title insurer First American Corp.

In 1995, at the depth of the region's last housing downturn, lender-owned homes accounted for 7% of all sales — and sold at an average discount of 15%, the study found.

Countrywide Financial Corp., the nation's biggest home-loan provider, declined to comment about the homes it was selling. On its website, the Calabasas-based lender offers a list of foreclosed homes for sale that tops 8,900 nationwide, up 60% since January.

Plans to build the tallest condominium on the West Coast are in jeopardy after the developer of the troubled $570 million towers missed a key deadline to resurrect the moribund project.

The chief equity partner in the effort, the giant California Public Employees' Retirement System, now has to decide if it wants to take over the debt-ridden project and move forward without developer John Saca.

CalPERS has hired a Los Angeles-based developer to decide if a significantly scaled-down version of the 53-story condominium and hotel towers could be built profitably, CalPERS spokeswoman Pat Macht told The Sacramento Bee. The pension fund has invested about $25 million in the plan.

Saca had until Friday to buy out CalPERS and restart construction on the project, known as The Towers.

“Things did not turn out the way we were hoping,” Saca said. “We had under 60 days to raise over $60 million for a project that was really underwater. ... We just ran out of time.”

A Reporter is arrested for asking Rudi a question._____________________________

ASK CONSPIRATORIAL QUESTIONS AND GO DIRECTLY TO JAIL

We've observed for years how anyone holding conspiratorial views is denigrated mercilessly on mainstream talk shows--especially those pretending to be conservative (Limbaugh, Hannity, and Beck et al.). After this week's GOP debate, it is clear the intolerance for journalists who ask the wrong questions has gone to another level entirely.

Matt Lepacek, a freelance reporter working for Infowars.com who claimed to have proper press credentials at CNN's Republican debate, was arrested by NH State Police at the command of Giuliani's press secretary after asking a question about Giuliani's foreknowledge of the collapse of the World Trade Center twin towers. Giuliani is denying he ever indicated he was forewarned even though there are dozens of internet copies of his TV audio interview with Peter Jennings in which he said, "I was told that the World Trade Center was gonna' collapse."

Another cameraman stringing for Infowars got the confrontation on tape:http://www.infowars.com/articles/ps/giuliani_reporter_arrested_on_orders_of_giuliani_press_sec.htm

The most burning question is why were New Hampshire State Police arresting a reporter merely on the non-verbal signal from Rudy Giuliani's press secretary? The police are scrambling to determine whose name they are going to put on the paperwork justifying the arrest, and are refusing to release that name until the hearing on July 1. This could result in a major lawsuit for illegal arrest and violation of 4th Amendment rights.

Lepacek also had a web cam hidden on his person which continued to record the sounds of his interaction with police in the patrol car after the arrest. The police threatened him with secret detention for espionage just because of the presence of a hidden camera. While this is ludicrous on its face, legally, it does indicate that the influence of the federal secret prison system has filtered down to state levels. Apparently, State Police are willing to funnel people into this new American Gulag as "anti-government traitors."

I predict that one of two possible scenarios will play out here. Either State prosecutors will try to plea bargain this out of existence (with a monetary payoff to Lepacek in exchange for immunity against lawsuits) or they will shop for a judge who will slap a gag order on all proceedings and deny that any of Lepacek's rights were violated. Lepacek was arrested for criminal trespass, which will be based on the presumption that he did not have a press pass. Note in the video that the Police took him away without making a determination about a pass. They were acting on orders of Giuliani's press agent.

_____

World Affairs Brief, June 8, 2007. Commentary and Insights on a Troubled World.

Helocs are drying up. Its tough when you can't borrow on your home to pay off your credit cards. What will the growth engine of the world do now to stay afloat?! Import more immigrants to keep the economy humming? (That's sarcasm by the way)

EVERYBODY START SPENDING!! It's the AMERICAN way. Or maybe we can just start another war somewhere else. That's always easy to do.

Buy Only what you are comfortable with financially. Don't chase the numbers, it will drive you crazy.Hold for the long haul, if that bugs you, don't buy! Buy coinage, paper is just that, paper. Coins can be sold quickly, bars usually have to be tested for purity content. Jewelry is not a great investment, too high a mark-up, when you sell, you get scrap weight value!

Damn, its a property made in heaven for the illegals. They can pool there money AND have a place to work after they buy it. Have a little bario in one corner of the golf course and you've got the AMERICAN DREAM.

Some of the hazards will be clotheslines, garbage dump, cars on blocks and hundreds and hundreds of little kids running around in diapers (all US citizens of course).

The article also mentions an historic home that didn't sell at auction. Here is a comment from the story.

"Boyleston said she was not sure why the three-story house on Spring Street did not sell."

Perhaps, it did not sell for some of the same reasons that the 6,000 - 7,000 other homes / businesses on the market in Escambia county are not selling.

Are real estate professionals are doing their best to live in a state of denial and put a positive spin on the real estate death spiral we're in.

Hey trollbuyers, get your ass down to Florida and buy that course. Its better than paying green fees!!

CHICAGO (Reuters) -Alan Greenspan, when chairman of theFederal Reserve, brushed off an idea to boost scrutiny of subprime mortgage lenders, a former Fed governor told the Wall Street Journal.

In an interview published on Saturday, Edward Gramlich, who was a Fed governor from 1997 to 2005, said he proposed to Greenspan in or around 2000 that the Fed start sending examiners into the offices of consumer-finance lenders that were units of Fed-regulated banks.

"He was opposed to it, so I didn't really pursue it," said Gramlich, who said he raised the idea with Greenspan personally rather than going to the full board of governors.

...

Greenspan, who retired from the Fed in early 2006, told the Journal he did not recall a specific discussion on subprime lenders but would have been opposed to a crackdown.

"For us to go in and audit how they act on their mortgage applications would have been a huge effort, and it's not clear to me we would have found anything that would have been worthwhile," Greenspan said.-----------------------------

"Wanh wanh wanh! It would be too much work for poor widdle Feddie! We'd have to take off time from our world-travels to Geneva with fawning audiences.

We're only the central bank for the biggest economy in the world, and auditing the biggest financial market in this economy, mortgages, isn't likely to turn up any little thing at all except massive fraud, underwriting delusions and utterly irresponsible lending causing massive systemic dislocation! I mean it's only the primary responsibility of a central bank to ensure stability and lending responsibilityi of the entire country's banking systems in return for providing them with free money. You can't like actually expect us to get mad at them!

Besides, it might look bad for Republican Voodoo economics and we can't have that! 9/11 changed everything! If we audit subprime mortgages then the terrorist will win!"

-----------------------------

Under new Chairman Ben Bernanke the Fed has started reviewing its oversight of holding-company units.

----------------------------------

Is this Bernanke's plan? Speak Lereahly, but carry a big stick. He may yet prove to be the Stealth Volcker-in-a-beard.

Everybody thought his inflation targeting meant only helicopters of cash. Maybe he's reminding us that inflation targeting means both ways.

Greenscam was the opposite: yammer on about free markets and Ayn Rand, but hand out free gubermint money when any wealthy institution got a boo boo.

"It's a new paradigm, and everybody who doesn't buy, now, will be priced out forever. Anybody who does buy will be rewarded with a lifetime of riches, as their property will continue its 30% yearly price increase.

Renters, and anybody born in a future generation, will not be able to afford a £15,000,000 starter home in 15 years. They will live in tent cities, and Hondas.

This asset bubble is different than all of the others - it will never slow down, or pop. The gains are permanent."

We've observed for years how anyone holding conspiratorial views is denigrated mercilessly on mainstream talk shows--especially those pretending to be conservative (Limbaugh, Hannity, and Beck et al.)

It's not just conservatives who view most conspiracy theorists as nut cases. Anyone capable of rational and logical thought can see that these people turn a blind eye to evidence in the same manner and religious fundamentalists reject scientific evidence.

Someone needs to explain to me how Zillow can raise the value of a 1300 square foot home by 14k in one month!This particular home is termite ridden and never been remodeled since it was built in the 1060s.Zillow's selling price: 683,000!

Now I know this is the bay area, but someone is paying that site big bucks to lie about the appraisals! Absolute BS!

Six months ago, a county survey found vacancy rates had fallen to 3.1 percent . . . How quickly things change

The association's Spring 2007 Vacancy & Rental Rate Survey found a 5.1 percent countywide vacancy rate, compared with 3.1 percent in its fall survey. The vacancy rate a year ago was reported at 3.4 percent.

The twice-yearly poll of local landlords and property managers found the average weighted monthly rent for all types of units was $1,142, a decrease of 8.3 percent from six months ago.

Year over year, the decline in rental rates was only a half-percent, however.

Some analysts said they were surprised that the study found rents to be falling. Six months ago, the association reported that landlords were enjoying rising rents and reduced vacancies.

At the time, association Executive Director Robert Pinnegar said potential home buyers were swelling the ranks of renters while they waited for house and condo prices to fall.

The new report attributes the shift, in part, to condominium conversion units returning to the rental market.

“Toward the end of last year, the surge in developers converting existing apartment stock into condominiums effectively came to an end,” the report said. “Many of these converted units have since returned to the market as rentals, increasing supply.”

Another reason for rising vacancies may be the combination of a sluggish economy and limited job growth, “which can have a direct influence on the demand for rental housing,” the report said.

Friends of ours are paying $5,000 a month in mortgage payments for a home they bought in Northern VA last year for $650,000 pretty much the entire salary of the husband. The wife is not working and is job hunting but the parents are living with them and they are helping to pay other expenses. My husband and I rent for $1575 a month with a million dollar view of the monuments. My friends are wonderful people but I am so glad we rent!!!!!!!!!!!

The free fall of the condominium conversion market has left a new product in its wake that could buy some time for the condo market to rebound for multifamily complex owners struggling with the dropping values of their investments.

Unsold condo units have re-entered the rental market, taking residence on the same property as already-sold condos. That's creating what analysts call "fractured interest" communities. It's not a situation that many owners expected, or even prefer.

While the new rental units might provide minimal returns on investment, the phenomenon has created a hybrid situation confusing to buyers, lenders and the owners themselves.

It will be a struggle to emerge from the rubble that was the condo conversion boom, as it's still not entirely clear how complexes once focused exclusively on either condominium or rental will fare with the mix of uses. There are implications related to values for the owner, common area maintenance, insurance and possibly even angry unit owners who intended to buy in a condo community, not an apartment complex.

"That will make things complicated because whoever buys that [complex] now has a fractured interest on their hands, where they have to deal with a homeowners association as well as rentals," said Steven Ekovich, First VP and regional manager for Marcus & Millichap's Tampa and Jacksonville offices. "When you're owning and renting, that doesn't always cater to the same interests."

Having a mixture of sales and rentals creates an uncommon situation for many of these complex owners, especially those who paid premiums for the properties to begin with and now are forced to either sell at tremendous losses or find ways to continue operating without foreclosing.

Rejecting the protests of affordable housing advocates, the Napa City Council gave itself the authority Tuesday to approve two condo conversion projects, not just one.

In coming months, owners of Cadillac Flats and Marina Vista apartments will be applying a second time to convert their moderately priced apartments into some of the city’s cheapest ownership housing.

Representatives of social service agencies wanted the council to keep a tight lid on conversions. Many renters at Cadillac Flats and Marina Vista will not be able to afford condos costing $300,000 and up, said Sue Dee Shenk, executive director of Napa Valley Community Housing.

“You’re talking about taking away the housing stock that is desperately needed by people who work here,” Shenk said.

“We strongly believe that the city of Napa needs affordable apartments more than it needs 80 condos,” said Bob Orser, executive director of the Napa Valley Coalition of Nonprofit Agencies.

A group of River Park residents rallied in support of expanded condo conversion opportunities, saying the Marina Vista complex had become a neighborhood blight.

“They are a scar on the neighborhood. They are old. They are shabby,” said Dr. Alvin Lee Block.

“The level of disintegration around Marina Vista is of serious concern to us,” said Raylene Thompson, who said her neighborhood had a rising crime problem.

The council voted 4-1 to expand the number of potential condo conversions in years when the apartment vacancy rate exceeds 5 percent.

A Kansas City, Kan., apartment building will become Wyandotte County's first high-rise condominium, the building's owner said Tuesday.

A $5 million-plus renovation is planned for Rainbow Tower, 3838 Rainbow Blvd. The building, to be renamed the Vista Condominiums, will contain 167 units. Prices will start at $89,000. Move-ins are to start in early July.

The true property investors knows that the real bargains are not at the "Beginning of the slump", but at the "Beginning of the recovery"

Why buy when prices are at the peak and about to fall.

Looking at the faces of those that attended there weren't that many bargains.

http://www.nytimes.com/2007/06/10/realestate/10nati.html

On the Block in California

ON a foggy Sunday morning last month, the parking lots around the convention center here were filling fast.

The volume of the traffic downtown was not unusual. What was unusual was that the men directing the traffic were wearing tuxedoes.

The crowd — about 1,200 people looking for deep discounts in real estate — was decidedly less formal, in jeans and Dockers, shorts and sandals. The casual dress code concealed the fact that many were serious buyers carrying millions of dollars collectively into the hall in cash and cashier’s checks.

Some were investors, like Dendy and Rita Villegas of San Diego, who were looking to pick up an inexpensive house to rent out. Some were first-time buyers, like Rodolfo and Veronica Gonzalez of Fontana, who were hoping to save $200,000 or so off the asking price of a family home.

They converged on an event the likes of which Californians have not seen in a decade: a large-scale auction of foreclosed homes.

On this occasion in Riverside, two lenders had put 100 properties on the block. By the end of the day, 93 had sold. Most of those properties were in fast-growing exurban and desert communities in Riverside and San Bernardino Counties east of Los Angeles.

The company that held the auction had been dormant for a decade. But in recent months, when mortgages started going bad and foreclosures multiplied, several lenders contacted the company’s officers and asked if they could get back into the business of auctioning properties.

“We went into hibernation, and we’re back!” said Robert Friedman, the chairman of the Real Estate Disposition Corporation, which is based in Irvine.

House price peak in the "Beginning of the slump" to the "Middle of the slump".

This is only the beginning stage for foreclosure - it has a long, long, long way to go before the foreclosure number peak.

http://www.azcentral.com/news/articles/0609investor0609.html

Foreclosures up for investors

Investors sparked the run-up in home sales and prices during the Valley's housing boom. Now, they are behind much of the area's rapid increase in foreclosures.

At least one-quarter of all Phoenix-area homes to fall into foreclosure this year are owned by investors, according to an Arizona Republic analysis of residential foreclosure records. The number is rising monthly as investors, who relied on adjustable-rate or subprime mortgages to buy properties, fall behind on climbing payments.

Many can't charge high enough rents to break even or sell their properties at a time when the market is flooded with listings. The effect on Valley neighborhoods can be significant. Homeowners in areas with many rentals, vacant homes and new foreclosures are seeing their values decline or stagnate. Too many of these homes can deter buyers and lead to blight if the properties aren't maintained.

"Investors, particularly individuals with multiple properties, are driving up the foreclosure numbers," said Tom Ruff, a principal with the Information Market, a Phoenix-based data research firm that compiled the residential foreclosure records. "Foreclosures in metro Phoenix haven't likely peaked yet, either," Ruff added.

along with the many other things president for life bush is busy attempting to provoke the russians with his silly missle shield idea and now his stupid idea of a free and independent kosovo...that idiot is going to single handedly, restart the cold war.....

It's really house debtership, and a house is only a home when people can spend time away from work and pay more attention to the needs of one another.

happy renter said... Friends of ours are paying $5,000 a month in mortgage payments for a home they bought in Northern VA last year for $650,000 pretty much the entire salary of the husband. The wife is not working and is job hunting but the parents are living with them and they are helping to pay other expenses. My husband and I rent for $1575 a month with a million dollar view of the monuments. My friends are wonderful people but I am so glad we rent!!!!!!!!!!!

Chuck and Joanna Young are moving to Las Vegas - once they sell their house.

It's been on the market since October and they've cut the price several times from $270,000 to $249,900. They've had three open houses - the most recent last Sunday with only one looker - and no offers.

The Youngs aren't alone. They're one of nine sellers in their fairly new neighborhood of about 50 homes in Burcale Commons - and one of about 1,060 similar-size homes for sale on the Grand Strand.

They're frustrated and, like most sellers, don't want to give away their property - but that's exactly what buyers are itching for them to do.

Buyers, on the hunt for slashed prices, great deals and the best price tag in the subdivision, are being patient - because they can - with a huge amount of inventory on the market, agents say.

It's an old-fashioned standoff.

"They are all waiting for someone to make a move. It's like Peter Pan chasing Captain Hook and the result is neither gains on the other," said Bernard Helm, analyst at Market Opportunity Research Enterprises, which tracks real estate markets in the Carolinas.

Prices on resale condominiums and townhomes have dropped since last year, but single-family prices are showing gains.

Sales, however, haven't kept pace with last year - falling 59 percent for resale condos and 33 percent for single-family homes in Horry County, according to MORE.

The median price - meaning half sold for more and half sold for less - of resale condominiums dropped 5 percent in the first quarter of 2007 from $178,350 last year to $169,000 this year in Horry County. Resale townhomes also dropped 9 percent to $135,000 from $148,000.

When analyzing the three phases of a property cycle always include the 7 major trends.

Three of them are National trends:

1) Interest Rate2) Flow of Funds3) Inflation

Four of them are Local trends:

4) Path of Progress.5) Migration6) Job Growth7) New Construction

Currently the National trends are against real estate.

Interest rate are higher then what most home owners would like them to be.

Flow of funds are leaving hard assets and into liquid assets.

Inflation is raising.

The four local trends plays a bigger part in your local area.

During the dotCom bust many people in the bay area lost their jobs at the same time interest rate was falling. The dotCom bust lead into a slump in the housing market. The housing slump had the biggest impact in Silicon Valley and the housing slump sent shock waves to outlining cities.

Although the housing slump did not impacted the cities farthest alway from the cities that supported the dotCom as much, prices of houses nevertheless did fall in 2001 for most cities.

However, the lowering of interest rate simulated the mortgage industries as the new "Path of Progress".

For a while Boston, Bay Area and Orange County stood out as the new center of the mortgage industry. However OC had the lowest rents and house prices between 2000 to 2002 of those cities so more people looking for work migrated to OC. This process is call Migration.

As Job Growth continue so did increasing rent price and demand for housing in OC.

New Construction industry boom in OC due to the rapid increase in potential home buyers.

In 2003 to 2006 as Federal Fund rate were raising, mortgage industries in OC got squeezed for profit so they turned to the hedge funds who where looking for an outlet to dump their liquidity from Yen Carry Trade; thus the Subprime industries was re-born.

Subprime lenders were widely used in the early 1920 in Florida, so the subprime lenders dust off the old play book and concentrated in providing loans in low cost area like Los Vegas Nevada, Sacramento to Fresno to Bakerfields, San Diego, Arizona, Colorado, Dallas, Florida, Utah, Kansas, Austin and etc.

Construction boom in those area with Los Vegas and Fresno house prices growing the fastest of all cities in United States during the early years of the recovery.

Many people who had a higher income but could not afford to buy a home in their cities like people from Boston, Bay Area, and OC fear that they were missing the boom so they brought homes outside of their area driving home prices higher in Los Vegas, Fresno, and Sacramento.

Once the higher income people got into the act other people in other cities (Los Vegas, Fresno, San Diego, and Sacramento) who seen their home equities go up got into the act also and brought property in Arizona, Colorado, Dallas, and Florida.

As property value increased in Arizona, Colorado, Dallas, and Florida those people got into the act and currently we are seeing run up in prices in places like Utah, Austin, Kansas, and etc.

Now places like Fresno with traditional high unemployment rate, high crime, and hot temperature are in a mist of a massive foreclosures.

Foreclosure rate in the central valley area are equal to those of the great depression.

New House prices all free falling in central valley, Sacramento, San Diego and rent in those area that are experiencing "Beginning of the slump" are falling.

Fearful of falling house price cities like the San Jose is limiting new home construction, not understanding that construction provided one of the most needed local trends "Job Growth"

A drop in employment will lead to a drop in rent if another "Path of Progress" does not get establish.

Every US economists knows that they need the BOJ to provide the global liquidity for the new "Path of Progress" even if it mean sacrificing run alway Inflation and simulating another bubble.

Sounds like 1926 when liquidity could not make money from the subprime mess so liquidity went right into the stock market.

Thank You BOJ for keeping your interest rate low at 0.5% so that excess liquidity from yen carry trade can be pumped into the global stock markets.

"Nobody should lend people more than they can pay back, urged the American Bankers Association, Mortgage Bankers Association, and other industry groups. The terms of a loan should be clear to the consumer. Ways should be found to help struggling mortgage holders stay in their homes."

It's a renter's marketPotential home buyers should wait until housing bubble unwinds

One question my friends and colleagues have asked me repeatedly over the past six months is: Are you still renting? Yes! I sold my house more than a year ago and continue to rent.

Back in late 2005, I became anxious about my investment in the American dream after spending a considerable amount of time and effort researching several factors that I thought would influence housing prices.

At the time, I was nervous about housing and ended up selling my house in early 2006 after owning for eight years.

Based on the outlook for housing, I will likely be renting for one to two more years. While many factors that influence housing prices have turned negative, I suspect we have not yet hit bottom.

In fact, housing prices should head lower throughout the rest of this year and next year as well.

Why? Housing inventories remain high, delinquencies and foreclosures are set to rise as homes purchased in the past few years by speculators and individuals with teaser-rate and adjustable-rate mortgages come back onto the market, affordability is low, and sentiment and risk appetite have shifted negatively.

Most importantly, the availability of credit is set to take a turn for the worse as lenders tighten credit standards.

This is all great news for renters and buyers who are patient. Over time, housing prices and interest rates should decline, resulting in improved affordability.

This adjustment, however, will take time and occur over a period of years, not months. Housing is illiquid and prices are sticky. As a result, potential buyers should exercise patience and not jump back into the housing market too early. A year ago, I described the state of the U.S. housing market as "the next Nasdaq bubble." The Nasdaq took more than 2 1/2 years to go from peak to trough.

I suspect housing prices could display a similar pattern, and we are still more than a year away from the bottom. Given these risks, I prefer renting rather than owning, and an investment strategy that favors defense over offense.

The Miami Herald's June 3 House of Lies article showed that the city, like the county, spent millions for affordable or rehabilitated housing that wasn't built and on contractors who failed to repay the loans.

That said, there are differences between the city's and county's housing programs. County officials didn't begin reforming the Housing Agency until The Miami Herald began investigating the department in the August 2006 House of Lies series. When last week's story on Miami housing was published, city officials could point to some helpful policy changes and initiatives over the last few years, including going after deadbeat developers.

Stop stalling

Even so, all is not well in Miami housing. The housing department is being audited by the city auditor, who complains that the housing director, Barbara Gomez, isn't cooperating. Mayor Manny Diaz should put a stop to that stalling.

Mayor Diaz is proud of the city's performance. He says changes instituted during his six years in office are addressing the problems, some of which his administration inherited. This is true. It also is true that during Mr. Diaz's tenure, Miami has been transformed by scores of high-rise projects, with thousands of new luxury housing units. In that same time, the city has gotten 1,800 new affordable housing units built and occupied, with another 1,800 under construction.

Building affordable housing is a specialty made difficult by government red tape and other challenges. Thus, 1,800 units in six years shows initiative although it doesn't match the great need.

The House of Lies investigations of the city and county housing programs found that a disturbing number of the deals were nonperformers, while some at the county proved fraudulent.

Also, it has been a tradition here that many nonprofit community development corporations operate on a subsidy-for-votes system. City and county commissioners would underwrite the CDCs and in exchange, the CDCs' directors would deliver votes in the next election.

This problem has been addressed in the city. In 1998, the U.S. Department of Housing and Urban Development chided Miami for failure to collect loans and for repeatedly funding nonperforming developers. In 2000, the city created a loan committee of private housing and finance experts to select housing-loan applicants, nominally removing politics from the process. As a result, commissioners aren't blatantly buying votes by subsidizing nonprofits.

The city commendably has been going after deadbeat developers in court, too. Yet there have been dubious deals during Mr. Diaz's tenure. For example, between 1988 and 1990, the city loaned Al Lorenzo $956,000 to rehab low-income apartments. Developer Salomon Yuken invested in the project and managed the apartments. The buildings were never repaired and eventually were torn down by the city. In 2000, Mr. Lorenzo served as Mr. Diaz's campaign manager.

Land sits idle

In 2001, the city demanded repayment from Mr. Lorenzo. But in a 2003 deal brokered by housing director Gomez, who was appointed by Mayor Diaz, the city allowed Mr. Yuken to assume Mr. Lorenzo's debt, which Ms. Gomez reduced by $180,000. Ms. Gomez then gave Mr. Yuken $1.2 million more to build homes where the never-repaired apartments had stood. Mr. Yuken used the money to repay part of Mr. Lorenzo's loan and back taxes on the property. Today, the land sits idle.

More encouraging have been new policies intended to discourage city-subsidized developers from flipping properties or, if they are flipped, of ensuring that the city is reimbursed its share plus a profit.

Still, the city can do better. Once the housing audit is complete, there likely will be more changes to consider. What has got to stop is housing programs administered in such a manner that delayed or failed projects leave the community's low-income residents in the lurch.

"When Treasury yields rise, yields on bonds backed by mortgages tend to rise more. Higher mortgage rates make it less likely homeowners will either refinance their mortgage or buy a new home. Fewer prepayments mean mortgage investors risk holding more mortgages on their books than they expected. To counter that, they readjust by either selling mortgages or selling Treasuries as a hedge. Both of those things drive Treasury yields and mortgage rates higher -- and can push more mortgage investors to sell.

Until yesterday, many mortgage investors appear to have been sitting out the rise in rates. But economic strength and rising interest rates overseas in combination with a Federal Reserve that market participants see as increasingly unlikely to lower rates finally forced their hand.

Mortgage portfolios may be back in balance, which could stem the selling for now. But if rates stay high, many of the debt-financed transactions private-equity firms have been using to acquire companies will be a lot higher. At the same time, the recovery in the housing market that investors keep hoping for could get pushed back."

For every 10 people who default and have homes repossessed, another 90 with patchy credit histories share in the long-term benefits of being on the property ladder.

However, the fees and profits to be made from overexuberant lending with lax underwriting standards have been too much to resist for large parts of the industry. This has caused widespread pain for investors in the bonds backed by this debt and has gone on to heighten concerns about similar practices.

Risk premiums are rising across most kinds of asset-backed debt, particularly since the extent of the US subprime crisis became apparent. Part of this is due to concern over lending standards generally and part is due to the effect the flight from subprime had on the business of structuring collateralised debt obligations built out of other asset-backed securities.

Kian Abouhossein, investment banks analyst at JPMorgan, expects a slowdown in the medium term from the “current peak-of-the-cycle revenue generation” for the industry.

This will be caused by a collapse in issuance of US subprime mortgages. Securities based on these mortgages accounted for a staggering 73 per cent of total ABS revenues last year.

And for perhaps the first time, many outside the ABS world are looking at the future of the industry as the fallout from the US subprime mortgage crisis weighs on the US economy and consumer sentiment.

Some analysts see securitisation as both the air that inflated the US housing bubble and the pin that popped it via the subprime mortgage crisis.

When BOJ can not do their job then other foreign central bankers must take their place.

Another hind that BOJ need to raise rate in July.

Why can't BOJ see that excess global liquidity is doing more damage then good.

http://www.bloomberg.com/apps/news?pid=20601087&sid=akp4OHpHQAwI

``It's a minus for the carry trade and a positive for the yen,'' said Yuji Saito, head of the foreign-exchange sales department at Societe Generale SA in Tokyo. ``There is a risk that carry trades will be unwound.''

New Zealand's dollar slumped after the central bank sold its currency, saying a 19 percent gain in the past year wasn't merited by the economy's outlook.

It was the first time the Reserve Bank of New Zealand has announced a sale using a NZ$7 billion ($5.3 billion) fund for stabilizing the currency. The exchange rate, which plunged from the strongest since it was set by the market in 1985, was ``unjustified,'' Governor Alan Bollard said in Wellington.

The New Zealand dollar was the best performing of the world's 16 most-actively traded currencies against the dollar in the past year because of carry trades, in which investors borrow Japanese yen to buy higher-yielding assets. Bollard last week raised the nation's benchmark interest rate to 8 percent, 7.5 percentage points higher than Japan's key borrowing cost.

``People now know that the New Zealand dollar has a limit,'' said Michael Gordon, currency strategist at Westpac Banking Corp. in Wellington. ``It's a lesson on how high the currency can go without consequences.''

The central bank sold the currency today because it regards current levels of the exchange rate ``as exceptional and unjustified in terms of the economic fundamentals,'' Bollard said in a statement today. He didn't say how much currency was sold.

In Japan, sending yen overseas for higher returns is no longer just a game for banks and hedge funds. Michiko Takeda is playing too.

Takeda, a 46-year-old homemaker from Sapporo City, is among a growing number of individual investors joining fund managers in shifting money out of Japan, where interest rates are the lowest of any major economy. Last year she put 2 million yen ($16,500) in an Australian bank, and ``even with exchange-rate risks, I'd like to invest more,'' she says.

The exodus of yen is driving the currency to record lows -- and ratcheting up pressure on Bank of Japan Governor Toshihiko Fukui and fellow policy makers to increase interest rates as soon as next month to encourage a controlled rise in the yen.

The concern: The longer they wait, the greater the chance that external forces lead to a sudden, sharper rebound that might cripple Japan's economy and shake consumers like Takeda.

``A jump in the yen could cause a disaster,'' says Hiroshi Shiraishi, an economist at Lehman Brothers Japan Inc. in Tokyo. ``It would probably hurt the whole economic cycle, starting from exports.''

The trigger might come in the form of a shock overseas that prompts fund managers to dump risky holdings financed by the so- called carry trade, in which yen borrowed at low Japanese rates are invested in higher-return securities in other countries.

Flowing Too Quickly

``It's reaching the point where the central bank must take rate action,'' says Hiromichi Shirakawa, a former Bank of Japan official and now chief economist at Credit Suisse Group in Tokyo. ``Capital is flowing out of Japan too quickly, making the economy vulnerable to currency fluctuations.''

Such a shock occurred in 1998, when the yen jumped 20 percent in less than two months following Russia's debt default. The yen's sudden snapback deepened Japan's second recession since its bubble economy burst in the early 1990s. The global reassessment of risk that followed helped trigger the collapse of Long Term Capital Management LP, then one of the world's biggest hedge funds.

A similar jump now, damaging Japan's export-based economy, might crimp the wage growth and consumer spending that the Bank of Japan is counting upon to keep the nation's longest postwar expansion going.

A wave of retirees is likely to increase the flow even more. The first of Japan's 7 million baby boomers reach the retirement age of 60 this year, triggering lump-sum payments that will total 50 trillion yen for those born between 1947 and 1949, according to Dai-ichi Life Research Institute Inc.

Retirees have ``little choice but to invest in countries with high growth and high interest rates,'' says Kenji Matsuo, chief financial strategist at Deutsche Asset Management in Tokyo. ``They want money soon.''

Recent comments from the Bank of Japan suggest increasing concern among central bankers about risks posed by the outflow of yen. In an April report, the bank introduced language highlighting the risk that investors may make imprudent decisions based on ``favorable'' assumptions about foreign- exchange and interest rates.

`Inefficient' Investment

Fukui, 71, followed that with another warning, saying expectations that rates will stay low could invite ``inefficient'' investment. ``If stock and bond markets or the yen carry trade become unbalanced and unwind, that would have a negative effect on the economy,'' he told lawmakers on June 5. ``Even if the chances of that happening are low, it would have a big impact.''

"The situation seems alright but if equities fall more than investors can bear, there would be a risk of a steeper- than-expected reversal of yen carry trades,"

The New Zealand dollar tumbled from a 22-year high versus the U.S. dollar on Monday after selling by the Reserve Bank of New Zealand raised concerns about how much longer carry trades would continue.

Analysts said that market participants may consider the New Zealand currency's losses as a sign that the carry trade, in which investors use low-yielding currencies such as the yen to pick up assets in high-yielding ones, may have gone too far.

"It may impact other high-yielding currencies by unnerving investors conducting carry trade who have become wary of rising interest rates worldwide," said Koji Fukaya, senior currency strategist at Deutsche Bank.

The Australian dollar slipped in sympathy with its New Zealand counterpart, falling roughly half a percent against the U.S. dollar and the yen.

You and your website were a big influence in my decision NOT to purchase a house when moving to Florida in January 2005. I trusted my instincts and listened to yours, and man-o-man am I glad I did.

The house I’m renting is on a quiet cul-de-sac in an upscale neighborhood, 2000 sq ft, 3 bed, 2 bath, large pool, private back yard, and the owner provides pool care and lawn maintenance. All that for $1200.00 per month. I estimate that the landlord - by the way he is an ‘accidental landlord’ as he bought the house hoping to flip it - is losing $3K-$4K per month in equity.

The house directly across the street has been vacant and “for sale” for 18 months. There is very little activity on the house, even after the owner - also a flipper that flopped - has reduced the asking price from $389K to $289K. Ouch! This owner bought the house in the fall of 2003 and paid way less than $289K. He got greedy by asking too much, didn’t pay attention and missed the curve, and is now ‘walking the market down’. He’s in for a big time haircut, because my guess is if he doesn’t get smarter, the house will eventually be back down to the 2003 price if he doesn’t unload it. I say that because pre-owned homes here in Sarasota County Florida are not selling and inventory is loaded to the gills. There is a very strong liklihood of a bloodbath here in residential real estate, in my humble opinion.

I think interest rate hikes may actually help (or hurt depending on how you look at it) the market. Say you are on the fence, you hear interest rates are jumping. You think, shit I better get in before rates go up even more. So in June and July there is a sudden burst of sales from these people.

Then in July and August the MSM comes out with "15% jump in sales" headlines. This spurs another batch of fence sitters to think, shit interest rates are going up AND sales are starting to pick up, I better get in now. Sales go up again in August, in Sept the MSM brings out the "15% sales surge in August" and the cycle continues.

Thoughts?

disclaimer: I am one of those fence sitters looking at the 6% mortgage slowly becoming extinct and starting to worry that prices aren't dropping much - 2-3% in my neck of the woods - yet interest rates are increasing and wondering if I really will be priced out forever if this trend continues.

Economists still do not get it. Look at http://tinyurl.com/2kqent ("The Spring of Home Sellers' Discontent") in which it says, "'The fundamental problem is too much inventory,' says Mark Zandi, chief economist at Moody's Economy.com". The fundamental problem is that PRICES ARE STILL WAY WAY TOO HIGH! Which of course leads to high inventory, as people cannot afford to buy at such insane prices!

No one in their right mind,regardless of income, would paythese over-inflated prices.

Unfortunately, these "economists" are doing more damage then good by feeding people lies.

There are good - level-headed - economists out there who tell it like it is, but - like Ron Paul - are not popular with the masses.

As a country we really don't like dealing with the truth.

This is consistently apparent as I continue reading posts from individuals here who keep saying that all is well.

DaveO said... Economists still do not get it. Look at http://tinyurl.com/2kqent ("The Spring of Home Sellers' Discontent") in which it says, "'The fundamental problem is too much inventory,' says Mark Zandi, chief economist at Moody's Economy.com". The fundamental problem is that PRICES ARE STILL WAY WAY TOO HIGH! Which of course leads to high inventory, as people cannot afford to buy at such insane prices!

A prior posting had pointed outthat it's important to look atyour situation - forget about whatyou hear or what other people are doing - look at facts, be completely objective.

If you're a fence sitter it's for agood reason - you can't afford the over-priced costs of home debtership.

Don't worry, these prices were hyper-inflated and have nothing to do with the real worth of houses.

Rent as long as you want to, and then buy - if that's something youreally want to commit to over the long-term.

Anonymous said... I think interest rate hikes may actually help (or hurt depending on how you look at it) the market. Say you are on the fence, you hear interest rates are jumping. You think, shit I better get in before rates go up even more. So in June and July there is a sudden burst of sales from these people.

Then in July and August the MSM comes out with "15% jump in sales" headlines. This spurs another batch of fence sitters to think, shit interest rates are going up AND sales are starting to pick up, I better get in now. Sales go up again in August, in Sept the MSM brings out the "15% sales surge in August" and the cycle continues.

Thoughts?

disclaimer: I am one of those fence sitters looking at the 6% mortgage slowly becoming extinct and starting to worry that prices aren't dropping much - 2-3% in my neck of the woods - yet interest rates are increasing and wondering if I really will be priced out forever if this trend continues.

We're in a real fix here, because even if the price of housing was reasonable comparable to average worker wages, the ability for new would-be house debters to qualify is much more difficult now - leading to more supply of houses.

(1) Prices are not realistic.(2) More and more houses are sitting on the market empty.(3) Harder to qualify to get into a starter house.(4) Unemployement is on the rise.(5) Decent paying jobs are on the decline in this country.(6) Schooling and health-care costs are increasing.

The fact is that around the world more and more people were being out-priced from getting into houses, and nothing would be said now if by some miracle our economies could roll along fine with every increasing hyper-inflated pricing - not so any longer.

Perhaps housing will have more to do with making a home then making a profit - like it should be.

That's a nice thought, but one that makes sense for the long-term.

Stephen said... "The fundamental problem is that PRICES ARE STILL WAY WAY TOO HIGH! Which of course leads to high inventory, as people cannot afford to buy at such insane prices!"-----------------------

That is correct, Daveo. I thought that economists knew that there is a price component to supply and demand. (Supply at a certain price versus demand at a certain price.)

The true is most people are easily bought, be it by greed, ego, status - or what ever.

It's nice to read comments like yours that are based on fact, not what the "experts" (talking heads) out there would have us believe.

Anonymous said... Hi Patrick,

You and your website were a big influence in my decision NOT to purchase a house when moving to Florida in January 2005. I trusted my instincts and listened to yours, and man-o-man am I glad I did.

The house I’m renting is on a quiet cul-de-sac in an upscale neighborhood, 2000 sq ft, 3 bed, 2 bath, large pool, private back yard, and the owner provides pool care and lawn maintenance. All that for $1200.00 per month. I estimate that the landlord - by the way he is an ‘accidental landlord’ as he bought the house hoping to flip it - is losing $3K-$4K per month in equity.

The house directly across the street has been vacant and “for sale” for 18 months. There is very little activity on the house, even after the owner - also a flipper that flopped - has reduced the asking price from $389K to $289K. Ouch! This owner bought the house in the fall of 2003 and paid way less than $289K. He got greedy by asking too much, didn’t pay attention and missed the curve, and is now ‘walking the market down’. He’s in for a big time haircut, because my guess is if he doesn’t get smarter, the house will eventually be back down to the 2003 price if he doesn’t unload it. I say that because pre-owned homes here in Sarasota County Florida are not selling and inventory is loaded to the gills. There is a very strong liklihood of a bloodbath here in residential real estate, in my humble opinion.

Stephen said... "The fundamental problem is that PRICES ARE STILL WAY WAY TOO HIGH!

----------------------------------Says who? "high" price is relative. I think $5 for a Starbucks cup of coffree is insane and would never pay that. Obviously I am in the minority given the tens of thousands of Starbucks across the country.

Same with homes. You might think $750K for a home is too high. The person who just bought the house for $750K thinks differently.

Just because a few bloggers keep saying prices will fall, prices will fall does not make it so.

"Just because a few bloggers keep saying prices will fall, prices will fall does not make it so."

Firs off sir you are an ASSHOLE for comparing a Cup-O-Joe price to a Cul-de-sac home price.

Second PRICES ARE DROPPING in some areas. here in Southern California. I am seeing homes being listed 10k less every month. Take your head out of your culo once in a while. You would be amazed as what it can do for your vision.

SOFIA, Bulgaria, June 11 — As he heads home from an eight-day European swing to face a hostile Congress, President Bush lashed out today at Democrats for scheduling a vote of no confidence on his attorney general, and vowed to get his stalled immigration legislation passed, saying, “I’ll see you at the bill signing.”

Hmmm. We know Bush didn't give a damn to American citizens from New Orleans during and after hurricane Katrina. We know that Bush didn't give a damn about the injured American soldiers at Walter Reed Hospital, who were recuperating from serious injuries amongst rats, roaches, leaks, and mold. We know that Bush didn't give a damn about Valerie Plame, an American CIA covert spy who was ousted by the White House just for political gains.

So, here we have a pattern of Bush not giving a damn to any American citizen who is not part of his crony club. Therefore, it makes us think why is he so in love with 20 million illegal Mexicans who did crossed the border. Do you really think that his amnesty to 20 million illegals has anything to do with the well-being of taxpayers? Open your eyes, sheeple!

Says who? "high" price is relative. I think $5 for a Starbucks cup of coffree is insane and would never pay that. Obviously I am in the minority given the tens of thousands of Starbucks across the country.

Same with homes. You might think $750K for a home is too high. The person who just bought the house for $750K thinks differently.

Just because a few bloggers keep saying prices will fall, prices will fall does not make it so.